Status Update; QE3
Guest Post by Macro Story;
Aside from countless banks calling for QE3 which one has to wonder if their analysis may be slightly biased for personal gain the question remains will we see QE3.
The November 2010 FOMC statement which launched QE2 made it clear why the Fed was expanding their balance sheet by $600 billion.
“To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to expand its holdings of securities.”
Assuming their basis for future QE has not changed then looking at the data may give us a sense of if and when QE3 will happen.
“To promote a stronger pace of economic recovery”
With rates already at zero the only remaining policy tool with a real chance of achieving this goal is a weak USD that will theoretically stimulate export growth. In the summer of 2010 the USD was approaching $88 whereas today it is $80. In other words the USD has room to run higher before the Fed feels the need to “short the dollar” through policy.
North Korea getting closer?
After N Korea managed to hold Kims Jong-Il’s death a secret for 48 hours, the majority of the Western media have been reporting about the event in a quite positive way. By judging the majority of media coverage, North Korea is getting “much” closer to the West, so we can all be a big happy family. We need to be together in these difficult times deja vú?
The great western Democracies have accomplished many great things this year. The Euromezz has just reached new levels of stupidy, latest being France poitning the finger at UK. Merkel doing her own thing. The OWS movement has been brutally fought by the governments. The MENA region has undergone a huge transformation with thousands of casualties, but it was worth it, since we managed to catch the bad guy, and law and order is now restored, so oil can flow freely. The people living of food stamps in the US has hit new highs, and the misery index continues climbing. Polarization in the society and inequality is reaching new highs (remember the 1%). Russia is rigging elections, while the banks are strugling to cope with the moral hazard that has brought them to the edge of the abyss. But all is fine, Fed will bail us out, while buying some more ES futures.
It is true, we are getting closer to North Korea, we just get a funny feeling, we have been moving towards less democracy and more manipulation. Let’s see if we all just become one big happy family. Below some thoughts from Startfor.
Chartology
While the Market is awaiting holiday season, there is little point in trading it. Market will probably consolidate during the last days of trading. Time well spent is going through charts, and thinking about the “big picture” for next year. Many have lost a lot of money during the wild swings this year. One thing many tend to forget though, is the fact the US markets are pretty much flat. It has been the Euromezz year, and will continue so. Let’s see if the Euro Zone problems spill over to the US. Meanwhile some long term trend to watch for;
Pre Santa Chart Update
The “Market” is the way it should be. Senior staff off the desks. No volumes, no liquidity, and everybody still waiting for the Santa Rally.
Short term Pre Santa chart levels to watch below;
China Debt, Government, Bad Loans, Economy
There is no Santa coming to China for a long time. As the local government debt problem continues, while the Chinese are constructing their own Manhattan, with the Hudson river, 5th Avenue etc, the mountain of debt is accumulating to new record levels. Before China starts bailing out the world, they nee to bail out their own local governments. Slow down in China continues…More from Bloomberg below;
News That Matters
Ft.com
The fate of a compromise deal to extend stimulus measures for the US economy for two months was thrown into doubt on Sunday after John Boehner, the Republican Speaker of the House, said he was opposed to the plan, http://ftalphaville.ft.com/thecut/2011/12/19/805041/boehner-casts-doubt-on-us-stimulus-deal/
China will open more channels for foreign institutions to invest in its stock markets, a move aimed at supporting share prices and helping to counter capital outflows as the economy slows. The FT says the Chinese securities regulator announced late on Friday that renminbi held offshore could be used to buy equities within China, http://ftalphaville.ft.com/thecut/2011/12/19/805011/china-opens-door-to-foreign-investors/
Kim Jong-il, North Korea’s dictator, has died, piling pressure on his inexperienced son to ensure the stability of his impoverished, nuclear-armed state, the FT reports. A North Korean television newscasterhttp://ftalphaville.ft.com/thecut/2011/12/19/804971/kim-jong-il-dies/
British banks and insurers are pouring billions into the country’s housing stock as they look to cash in on rising rents and find wealth stores away from the turmoil rippling through the markets, reports the FT. Financial institutions ploughed £2.2bn into houses and apartments in the UK during the 12 months to April this year, http://ftalphaville.ft.com/thecut/2011/12/19/804881/insurers-and-banks-plough-2-2bn-into-housing/
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