Category Archives: Quantitative Easing

19th November 2013 — No bubble here Part II

As if we needed it, last week we were served further evidence of the precarious position policy makers find themselves in and the poor state of journalism covering this crucial issue, which is likely to define several generations. This all took place in the events surrounding Janet Yellen’s confirmation hearing before the Senate Banking Committee and I am, of course, talking about how the Fed ever hopes to withdraw and unwind its Quantitative Easing programme.

The headlines after Yellen read her prepared remarks were what you’d expect in this “keep calm and carry on” world of ours – “Yellen sails through confirmation hearing”, “Yellen says imperative to promote strong recovery”, “Yellen says Fed has more work to do to promote recovery” etc etc.

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15th November 2013 — No bubble here – Part 1

Guggenheim Partners’ “Macro View” is written by the firm’s Chief Investment Officer, Scott Minerd. It is an excellent market round-up and is rare in that it offers genuine insight into what guides the decision making of one of the most successful fund managers around. And it’s free to sign up to!

OK so now I’ve got the fawning praise out of the way (and no I haven’t received a PR commission to write this blog) I want to draw attention to Mr Minerd’s latest piece. Building on last week’s theme, that liquidity drowned equity markets could be about to experience a crescendo similar to 1999, this week he’s used the S&P500 Equity Risk Premium as a means of further demonstrating that stocks still have some way to go in their irresistible march higher.

 

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29th October 2013 — Fed monetary policy – building a modern Tower of Babel

The story of the Tower of Babel is one of the classic legends of humanity overreaching itself.

Recorded in the Book of Genesis, the Babel story tells of a time when all the people on Earth lived united and shared a common language. They gathered in modern day Baghdad (a.k.a. Babylon) to build a great city and tower to celebrate their superiority and advanced learning. God, however, took a different view of their achievements. He came down from the tower, scattered the people across the face of the earth and introduced different languages, to confound future attempts at such hubris. Some non-Biblical versions of this story have God destroying the Tower of Babel as a punishment.

Whether or not you believe the story of the Tower of Babel, ancient insight into the human condition recognised the dangers our species can pose to itself when it becomes too assured in its ability to control all that it is surrounded by.

Sadly this lesson appears lost on modern central planners.

 

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23rd October 2013 — The taper is off

I spent much of the last week toying with the idea that the taper might be back on at the end of this month. I was starting to build a plan to short the market, figuring I’d spotted something everyone else had missed.

Sadly this turned out to be nothing more than vanity!

After the “deal” that was reached last Wednesday to extend the debt ceiling (again!), I wondered if this might have removed the political uncertainty, which had such a bearing on September’s Bernanke Blink. Looks like I was wrong.

When trying to anticipate anything to do with the Fed over the last few years, the best thing to do has been to wait and see what Jon Hilsenrath has had to say. It is well known that the chief economics correspondent of the Wall Street Journal is Bernanke’s favoured mouthpiece in the free media.

 

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17th October 2013 — Debt ceiling extended, taper back on, short stocks?!

If it wasn’t for the last minute, nothing would ever get done in American politics. For the third time in a row, a compromise was reached, seeing the debt ceiling temporarily extended, the government reopen and the crisis averted.

In reality, absolutely nothing of any substance was achieved last night, other than a further delaying of the inevitable. America’s structural deficit remains unchecked and the shutdown of the last few weeks will prove to be utterly pointless, as federal workers will receive back pay. The Federal Government is now permitted to continue borrowing until February 7th next year.

This might sound like we have four months to wait until the next installment of this never ending drama, but there are some potentially significant repercussions of what has happened in the last few days, which could have altered the landscape dramatically.

 

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