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Quantitativeeasing

No Signs Of QE Tapering From The BoE Yet (06 August 2021)The BoE’s decision. As widely expected, the Bank of England (BoE) carried out no change to its monetary policy during its meeting yesterday. Interest rate remains at 0.10% with all eight voting committee members voting for no change. Quantitative easing (QE) remains at £895 billion in total. Michael Saunders, one of the hawks of BoE, voted for a reduction in government bonds purchase by £45 billion. Overall positive outlook of the UK economy in the near future. In the quarterly release of the BoE’s monetary policy report, the central bank said that the “impact of COVID on the UK economy fades further over time” although the Delta variant of the virus continues to spread in the UK. The confidence on the economic recovery led to the central bank’s positive revision of its economic projections. Economic Projections: For year 2021, UK GDP: 7.25 (7.25) CPI Inflation: 4.00 (2.50) Unemployment Rate: 4.75 (5.00) For year 2022, UK GDP: 6.00 (5.75) CPI Inflation: 4.00 (2.50) Unemployment Rate: 4.75 (5.00) For year 2023, UK GDP: 1.50 (1.25) CPI Inflation: 2.00 (2.00) Unemployment Rate: 4.25 (4.25) *Figures shown in parentheses refers to projections from May 2021 The BoE expects the UK economy to return to pre-pandemic level during the fourth quarter of 2021. As with the other major central banks, the BoE also felt that the recent rise in inflation is due to transitory factors. With the ceasing of the UK furlough scheme at the end of September, BoE Governor Andrew Bailey highlighted that unemployment was “no longer expected to rise”. He also mentioned that the challenge for the economy now is whether employers can fill up the job vacancies. On the matter of QE. Little was mentioned on QE during this meeting. The BoE said towards the end of its rate statement that “should the economy evolve broadly in line with the central projections in the August Monetary Policy Report, some modest tightening of monetary policy over the forecast period is likely to be necessary to be consistent with meeting the inflation target sustainably in the medium term”. The committee members also intend to start unloading the bond purchased by the central bank when interest rate has risen to 0.5% and will consider to do so actively when interest rate is at least 1%. According to the BoE, interest rate is projected to be at 0.5% by the third quarter of 2024. Hence, it is likely that the central bank will be holding on to its purchases at least in the near future. Interest Rate Projection: 2022 Q3: 0.2% 2023 Q3: 0.4% 2024 Q3: 0.5%
by GH_Lee
Fed QE Tapering Talks Reaching A Crescendo (05 August 2021)Just a couple of days before the release of the long-awaited U.S. nonfarm jobs report, several Federal Reserve committee members expressed their hawkish views on an QE tapering. Fed Vice Chairman sees QE tapering to start this year. During his speech at the Peterson Institute for International Economics yesterday, Fed Vice Chairman Richard Clarida said that together with the other committee members, they expect the U.S. economy to continue recovering towards the central bank’s “substantial further progress” standard although this was not met in July. Also, Clarida highlighted that if his “baseline outlook does materialize”, then he expects the announcement for quantitative easing (QE) tapering to be made later this year. With the progress made in recent months, he believes the Fed is ready for a first round of tapering by year-end. In regard to interest rate, Clarida explained that the three conditions required before the Fed considers a rate hike are: Labor market conditions reaching levels consistent with the Fed’s assessments of maximum employment Annual inflation rising to 2% Annual inflation is on track to moderately exceed 2% for some time And in a scenario whereby the Fed’s economic projections realized over the forecast horizon, Clarida believes that the three conditions will be met by the end of 2022, thus anticipating a rate hike in 2023. Other committee members in favor of carrying out QE tapering soon. Fed committee member Robert Kaplan said in an interview yesterday that the Fed should start tapering QE soon and gradually as this will give the central bank more flexibility in the future in terms of interest rate adjustments. He also highlighted that continued progress in the job market for July and August should warrant an early tapering of QE. Another Fed committee member James Bullard also supported the idea of an early tapering of QE during an interview with the following reasons: Economic growth in 2021 will likely exceed the central bank’s projection of 4% Unemployment rate has declined much faster than projected Annual inflation for 2021 will likely surpass the projected 1.8% Hence, Bullard believes it will not be an issue meeting the criteria to get QE tapering started.
TVC:DXY
by GH_Lee
1
RBA Sticks With QE Tapering Plan (04 August 2021)The RBA’s decision. During their monetary policy meeting yesterday, the Reserve Bank of Australia (RBA) kept its monetary policy unchanged, holding interest rate at 0.10% and quantitative easing (QE) at a rate of A$5 billion per week. A little surprise. With the recent spike in COVID cases in Australia due to the highly contagious Delta variant, the market was anticipating the RBA to announce the holding back of their QE tapering plan that was made during the previous meeting. However, the central bank stuck to its tapering plan of A$4 billion per week that will run from early September to at least mid-November. RBA downplayed impact of virus outbreaks on economic recovery. Although the RBA decided to stick with its QE tapering plan, it did acknowledge that the recent virus outbreaks are “interrupting the recovery and GDP is expected to decline in the September quarter”. Nonetheless, the central bank is confident that the Australian economy will rebound quickly after getting hit by the outbreaks as justified by previous occurrences. Impact on the Australian dollar. The Australian dollar strengthened as a result of the RBA sticking with their QE tapering plan.
by GH_Lee
FED: Recovery Heading Towards The Right Direction (29 July 2021)The Fed’s decision. The U.S. Federal Reserve delivered no surprise during their monetary policy meeting earlier today as widely expected. The Federal Funds Rate was held unchanged at the target range of 0-0.25% while quantitative easing remains at $120 billion per month ($80 billion of Treasury securities and $40 billion of agency mortgage-backed securities). Optimistic tone on U.S. economic recovery in the rate statement. Although no actions were carried out, the Fed did expressed signs of optimism on the U.S. economic recovery in the interest rate statement. The following changes made in the statement indicate so. The sentence: “Amid this progress and strong policy support, indicators of economic activity and employment have strengthened.” has been revised to: “With progress on vaccinations and strong policy support, indicators of economic activity and employment have continued to strengthen.” The change indicates continued recovery in economic activities and employment. The sentence: “The sectors most adversely affected by the pandemic remain weak but have shown improvement.” has been revised to: “The sectors most adversely affected by the pandemic have shown improvement but have not fully recovered.” The change indicates that the sectors most adversely affected by the pandemic have improved since the previous meeting. The sentence: “Since then, the economy has made progress toward these goals, and the Committee will continue to assess progress in coming meetings.” has been added into the latest statement, indicating optimism in the economic recovery. Progress made in economic recovery but still far from full recovery. Despite the optimistic tone sent out by the Fed, the central bank’s Chairman Jerome Powell cautioned during the press conference that the economy is still a distance away from making “substantial further progress” towards the Fed’s goals of maximum employment and price stability. This does not come as a surprise since the U.S. job market is still around 6.3 million jobs away from the pre-pandemic level. Furthermore, Powell highlighted that inflation is expected to remain above the central bank’s target in the upcoming months but not sufficient to trigger a change in monetary policy. On the issue of the recent rise in COVID cases due to the Delta variant, Powell downplayed the negative impact it has on the U.S. economic recovery. He said: “With successive waves of Covid over the past year and some months now, there has tended to be...less in the way of economic implications from each wave, and we will see whether that is the case with the Delta variety,” expressing confidence that the handling of the Delta variant will be more effective than handling COVID-19 when it was first declared a pandemic. Impact on the market. The upbeat tone delivered by the Fed resulted in the market going risk-on, increasing the demand for risky assets and currencies. Thus, the safe haven U.S. dollar weakened against the other major currencies.
TVC:DXY
by GH_Lee
Scenarios for yield curve control.After the bull run (due to the cut of the interest rates and Quantitative easing from the FED), the LDQ ETF has been distributing since late July. Historically, the 0.786 and the 0.618 retracements are an inflection point, where the previous trend reverses. We can see this pattern in all assets with an institutional interest. Until now, the FED is letting the inflation expectations run to justify later the money printing and yield curve control. Therefore, I expect a five-wave impulse to the downside or maybe a big ZigZag around the retracements mentioned before.
AMEX:LQDShort
by LiquidityMaster
Money Supply, Velocity, Inflation, Rates & the Federal ReserveI was taught in undergrad that adding to the money supply is inflationary . The logic was, you print more bills; the existing currency gets diluted in buying power. Following the ‘Crises of 2008’ the Fed launches Quantitative easing and purchases long term securities increasing the money supply and lowering rates. This activity would result in more investment and encourage lending. Keep in mind the lever the Fed historically wielded was changing the short-term interest rate, so by lowering the discount rate that banks pay on short term loans from the Fed, the Fed is able to provide liquidity and – ease. Monetary Policy's version of stimulus. Quantitative Easing was much more potent and was a lever that enabled much more control for the Fed, and control over a longer time frame. Keep in mind the mandate of the Fed: Maximum Employment Stable Prices Moderate Long-Term Interest Rates One can see that the Fed's tool kit was easily justified by the Board of Governors as they sought to fulfill Congress’ mandate. Not to mention the stability here is global, at least the Fed is responsible for keeping everything stable. This status for America globally is a great privilege. Many Americans are not cognizant of what this affords to us as individuals in this nation. QE did result in in inflation, but the environment has not been unruly with any problematic inflation , and we certainly did not get any Hyper-Inflation like so many economist were shouting about, especially those grounded in traditional economic ideology. This new environment has me wondering again how this will all play out of course as the parts at play are each so multifaceted. With that said, I would think we see inflation rise especially with the macro environment of easing and potential fiscal policy and the Federal Funds rate being this low. With that said, the biggest concern I have with this thought process is curiosity of what was stated by Jerome Powell in the last FOMC meeting – rates will be at these levels near the zero-bound (limit of 0% for short-term rates) with the Fed setting a higher target for inflation . Keep in mind the Fed has never been able to hit their recent targets for inflation for years, yet now they want the target even higher. With that thinking in mind, he seemed to indicate the reason the Federal Funds rate can be so low for so long is because inflation will not even be getting to their own target, just as it hasn't in recent memory. Again I still have a bias towards a weaker dollar and inflation – I am however readily willing to change my mind on a moments notice here as we see what actually transpires. I have an alternative to all the "deflation" vs "inflation" debates - an environment that will be stable with just modest inflation. Please be sure to comment, debate and let me know where you think the dollar goes next.
FRED:WM2NSEducation
by ZenMode
88
Silver on its way back up (cont.)Silver’s larger overall Elliot impulse wave started in mid-March, and I believe we just completed wave 4’s correction. This overall trend is noted by the blue Elliot impulse wave in the chart. I took a guess and put the end of this impulse at $33.54. It just seems like the support and resistance levels line up well here when considering the chart dating back to mid-March, and so does the 2.618 Fibonacci extension level of more recent patterns. This is purely a guess though, I have no way of knowing where wave 5 will end up. Within the overall pattern are smaller fractals of Elliot waves that I have labeled yellow for impulse waves and white for correction waves. I have June 15 as the date that the most recent 12345 Elliot impulse wave started and the Aug 6-7 peak as the top of wave 5. It looks like wave C of the correction just bottomed out, and the silver is climbing back upwards. This is between the 38.2% and 50% Fibonacci retracement levels of the overall chart (the blue line, dating back to mid-March). That means that right now is an excellent long-term time time to buy silver. I do expect silver to continue to be bullish. The effect of scarcity in markets cannot be overstated. We know that central banks are very good at creating fiat currency out of thin air. We know that alchemists have thus far been unsuccessful in creating precious metals out of thin air. When we speak of the price of silver (or any other commodity) in terms of fiat (usually the US dollar) we are comparing an element to a fiat currency that is being created out of thin air at an ever increasing rate. And, if we think of price as a function of the relative scarcity of one thing to another, it’s hard to imagine how the relative value of the elemental metal won’t increase. And what about demand? Silver is an essential part of solar panels and the electric circuitry of things like cell phones and other electronics. 5G? Electric cars? Solar powered homes? Smart homes? If you think those are going to be ever-increasing aspects of our daily lives, then you should have no doubt about silver’s outlook from a demand perspective. And so, I do think that silver will continue to remain bullish relative to fiat. I do believe that the current price will be looked back on as a low, and a great opportunity to buy. And, yes, I do believe we will soon enter another bullish Elliot impulse wave. You’ll look back and brag about how you bought silver back in August 2020.
SLong
by tarbh
Money Velocity is in Complete FreeFallM2V most recent data is from December 2019. It is likely near zero at the present moment. Some voices are saying that the Fed liquidity and balance sheet expansion is inflationary, but the charts tell a different story. The velocity of M2 is in complete freefall. We have reached the point where interest suppression is no longer an effective tool for monetary policy. It doesn't matter how low rates go or how much the Fed is willing to lend, people don't want to spend or borrow, and insolvent businesses are going to self-liquidate. People are hoarding cash, and rightfully so. You can't print your way out of a global demand shock and supply shock. If you study M2V closely, it tells a story. What you'll see is that the Fed has been in a liquidity trap for the last 20 years. To avoid a big deflation they've pushed rates lower and lower to stimulate growth now and push the problems down the road, but now we're at the end of the road and facing a bigger deflation than we could have ever imagined. There's no more growth to stimulate.
FRED:WM2NS
by Ludwig_Von_Mises
2
SPY 400 by Labor Day (S&P 4000 this summer)We have not reached the top yet. The S&P will rise due to unprecedented liquidity and serious retail FOMO will kick in for a parabolic rise to SPY 400 (S&P 4000) by labor day 2020. This is the end of a 30+ year secular bull market. Once the fed signals slowing of quantitative easing due to rising S&P and economy showing signs of recovery, the bust will reach its second stage and kick S&P down to 800. Deflation will take control, leading to more QE and trigger inflation long term. Gold $10k by end of decade. Bitcoin will tag along the melt-up and will reach ATH this summer, then crash with the S&P but find a strong support level above $20k and reach $1MM by end of decade.
AMEX:SPYLong
by HashtagTrading
3
"Nobody Could've Seen this Coming" Is a Horse Sh1t Wall St. LieI was monitoring this ratio throughout 2019. Anyone following this could've seen that Gold was beginning to take US stocks's lunch money. You can clearly see that US stock outperformance over Gold ended in late 2018. You can then see that a series of lower highs and lower lows were formed, and you can also see that multi-year rising trend support was violated with volatility behind it. The trend already started, if you're late to the game, hop on now. Gold is going to outperform EM equities and US equities for YEARS. It's my view that 1250-1300 (25%) is the max potential drawdown for Gold. For the S&P 500 and the Russell, the max drawdown is closer to 60-90%(!!!) We are entering an extremely serious debt deflation. I like US Dollars and Gold as my two biggest allocations. Also, if no one told you yet, stay the hell away from USO
TVC:RUTShort
by Ludwig_Von_Mises
6
GDP? More Like Debt-Financed ConsumptionNotice the time period where the rate of change began to significantly increase. Sad that TV doesn't have the data but if you go and look, inflation from 1700-1900 was extremely stable. Not the "2%" per year inflation of today, was more like gradual deflation over time, with certainty that your money would be worth the same 100 years from now. During the classic gold standard era, from 1870-1910, real growth averaged 8-10% per year, and we had 3% deflation per year. The banking system of today is based off of printing lots of money, getting caught in a liquidity trap, and then being at risk of a major deflation because you thought you were smart enough to inflate an asset bubble with no consequences. That's where we are at right now. Very similar to 1929.
FRED:CPIAUCSL
by Ludwig_Von_Mises
Technical Breakdown in DXY. STRONG & GROWING Fundamental DriversCheck out my DXY chart from November. DXY fell from 99, just under 100, all the way down to 95/94 in ~2 weeks. High correlation with the Fed cutting rates and yields falling. With the twin deficits set to GROW not shrink and the Fed's balance sheet set to GROW not shrink, and with interest rates set to FALL not rise, the path for the US dollar is looking more and more clear. Weakening dollar will mean foreign markets outperform US markets and rising commodity prices. Markets can still crash but they will crash in terms of gold. Look at the DJI to Gold ratio for reference. Quantitative easing from 2011-2015 did not work. For that reason I think we can easily take out 80 and 70 in the DXY. For the DXY to go on another bull market cycle there would have to be decent growth expectations in the US behind that. That's not happening. We are loaded up on massive amounts of debt. Growth rates are going lower not higher. Central bank balance sheet expansion (Counterfeiting/money printing) is going higher.
INDEX:DXYLong
by Ludwig_Von_Mises
Prepare to Buy the Dips in Gold & Gold StocksKirkland Lake is down 40% from gold's September high of 1550 yet Gold is pushing $1700. Its down 18% from the market meltdown. I suspect this means that if gold gets sold in the coming crash that the dip in gold and gold mining stocks will be limited not extended. It won't be like 2008. A 60% correction from September's high puts Kirkland at $20/share. I will be buying that if we even get that low. If we get lower than that consider it a blessing. Kirkland has some really amazing All-In-Sustaining-Costs to getting gold out of the ground. $2000 - $3000 gold will be incredible for Kirkland lake.
KLong
by Ludwig_Von_Mises
1
Nobody is looking at this BTCUSD symmetric triangleNobody is looking at this symmetric triangle at the one hour BTCUSD chart. I personally give 60% chance that this triangle breaks to the upside and 40% change that breaks to the downside, due to the current conditions. We are now in uncharted territory considering the global economy and current issues with the pandemic. However, with the infinite QE announcement and the corresponding fiat issues, we might start recovering and get back to the 8000 dollars level.
BITSTAMP:BTCUSDLong
by centuo
5
Platinum Breakout & Palladium Blow-off TopPlatinum at current levels presents tremendous value. The precious metals take turns outperforming and underperforming. In the late 90s palladium went into a bubble while gold, silver, and platinum bottomed out. Then throughout the 00's palladium moved sideways while platinum, silver, and gold all outperformed. I believe we are nearing a similar setup where US stocks will enter a blow off top and palladium will follow. Following this blow-off top platinum and silver will begin to drastically outperform. Additionally, the more expensive palladium gets, the more likely industry will find ways to substitute towards platinum. This is especially the case since most of palladium demand comes from China. Be keeping an eye on these metals, along with gold and silver.
TVC:PLATINUM
by Ludwig_Von_Mises
US Stock Market Making 2nd Attempt at Parabolic Blow-Off TopI believe we will get either a blow-off top in the S&P or a fundamental event that kills the expansion, sending price below the magenta rising support line. If the Fed is too slow to expand the balance sheet, then stocks can correct significantly until the Fed eases adequately. If Trump wins and the Fed expands their balance sheet in 2020 at a fast enough pace, then spx will enter a blow-off top mania. If Bernie or Warren win, a significant correction will take place but SPX may bounce once rates hit zero or negative. If the Fed is slow to move (quite likely) then SPX will swing really violently and could get scary for some investors and traders In my view, the SPX is only worth trading, it is not worth investing in. Now is the time to be getting out of US stocks and US dollars and into emerging markets and commodities. Sometimes being a better investor means passing up immediate returns via central bank fueled irrational exuberance and waiting for an even better opportunity later once the music has stopped and everyone has been exposed. Impossible to predict the top, so better off not fully participating.
SP:SPX
by Ludwig_Von_Mises
1
Gold-Gold Miners-DXY-Fed Funds-Monetary Base All CorrelatingThis is the Gold Miners Index to DXY ratio. This feels likes 2001 or 2009. Gold is correlating with Fed Funds, the monetary base, and the DXY like its 2009 and 2001. Gold stocks are priced like its 2009. Since 2019 we have seen the Fed Funds Rate free fall, since September 2019 we have seen the monetary base expand past the low set in December 2016, same with the Fed's balance sheet. We have seen the Fed Rate continue to fall now down to 1.00-1.25. And since September we've seen gold continue to make new highs, the US dollar / DXY break through critical support. We've also seen gold and gold stocks breakout against US indices. Could this be the beginning of the next bull run? Could this be the run we started in 2009 and prematurely ended in 2011? If so, hold on to your seat because we're just getting started here. Look for Gold Miners (XAU) to DXY ratio to start surging as the mining sector plays catch up to gold and as the Fed Funds rate continues to plummet and the balance sheet / monetary base continue to grow. What's interesting is the gold tends to fall when the monetary base falls. But gold has tended to rise when the monetary base moves sideways. It seems like without Fed intervention the monetary base is shrinking and the only way to keep asset prices propped up is to keep expanding the base. This means gold could be on the cusp of an incredible move without much downside even with the prospects of a broad market crash remaining fairly high.
TVC:XAULong
by Ludwig_Von_Mises
Gold Miners Set to Outperform US Stock MarketTechnical breakout and retest. My expectation for 2020 is a volatile market for both the US indices and for the gold miners. I think gold miners will actually outperform US stocks to the downside here and then will explode higher once we reach full ZIRP and QE5++. The SPX and other US indices could take a major blow in terms of gold which will drag down gold miners a bit but they won't get killed like in 2008. I think miners are waiting for gold to clear $2000/oz, then they will soar like you cannot believe. I think we can get $2000/oz A LOT faster than seems possible. Gold miners are at historical lows relative to the rest of the US economy. Be snagging shares during this period of correction. I ultimately think XAU could surpass all-time highs or at least surpass 0.2 on this ratio but even if we don't get that and all we get is 0.1, we will still make a killing in gold miners. if we go to .2 or higher we will make a fortune.
NASDAQ:XAULong
by Ludwig_Von_Mises
1