Market Montage
Stock Market, Economics, Equity Analysis
Sep13
There are multiple downsides to such a program as an open ended QE as every thing has pros and cons but one I will point out now and will repeat into the future is, a large part of the magic of the Federal Reserve the past few years has been the "Don't fight the Fed" mantra. Markets have generally gone up on quantitative easing/operation twist programs. And the market has been buoyed countless times by even rumors of new operations beginning in between programs.
So by having what is in effect permanent programs you lose both those advantages. There will be no more WSJ or Reuters leaks about the potential for an imminent QE 4, QE 5, or whatever number because this is QEn. More damaging than that is a lot of this is the emperor's clothes theory ala Wizard of Oz. What do you think happens to the psyche of the market the first time there is a >10% correction during open ended QE?
For now none of this matters, but when the first real selloff happens during "open ended" QE – observing the reactions of the people in the marketplace will be fascinating. That said, make no mistake we are in a completely different era where the central bank owns the band, and everyone is dancing to their tunes. May we live in interesting times.
Sep13
$40B a month of QE (completely focus on MBS) until at least end of year
Exceptionally low rates pushed out to at least mid 2015.
More or less what was whispered….except that all the QE will be in the mortgage market, rather than a mix of Treasuries and mortgage backed securities.
Big line here —> FOMC: "expects that a highly accommodative stance…will remain appropriate for a considerable time after the economic recovery strengthens"
Sep12
Been a rough few months for the former high flier Monster Beverage (MNST). Late this spring the stock briefly rocketed intraday to near $80 on a report Coca Cola would make a move to take the company over. (later disputed) Then the stock suffered along with the rest of the market May through July. A weak report smashed it mid August, and this morning a disclosure about the NY AG probing the industry of energy drinks for misleading practices hit the WSJ and is crushing the stock anew. …
Sep12
It's been a rough week for the NASDAQ as the index has given back a big portion of last Thursday's gap and go session.
A lot of this is due to an over reliance on Apple – which of course has been a big positive in 2012 as the stock has had a huge run. But going into this afternoon's iPhone 5 launch the stock has sold off in a material way (relative to it's normal history). …
Sep12
While this bailout fund approval was widely expected by the German court it was a potential fly in the ointment. Futures are happy with the result as we begin day 1 of the Fed meetingl the euro rallies and the dollar continues a major swoon. Via Reuters:
- Germany's Constitutional Court gave a green light on Wednesday for the country to ratify the euro zone's new rescue fund and budget pact but gave parliament veto powers over any future increases in the size of the fund.
- Rejecting injunction requests from 37,000 plaintiffs seeking to block the treaties, the court said ratification of the European Stability Mechanism(ESM) could go ahead with the "proviso" that German liability be limited to 190 billion euros ($244.77 billion), as agreed in the ESM treaty. Any increase in that amount would require prior approval by the Bundestag lower house of parliament.
- The plaintiffs, including euroskeptics from Chancellor Angela Merkel's ruling center-right coalition and Left Party hard-liners opposed to European integration, had argued that the treaties expose Germany to unlimited financial liability and cede too much sovereignty to centralized European authorities. The court ruled as it has in the past that deeper integration of the European Union did not violate the German "Basic Law" as long as parliament was fully consulted.
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