http://albertpeia.com/bernankebluff.htm
‘The markets roared from June
to September, ever Fed mouthpiece Jon Hilsenrath of the WSJ penned an article
calling for more QE in June. Fast-forward to mid-September and the Fed did
indeed announce QE3, a plan that will see the Fed monetize $40 billion worth of
Mortgage Backed Securities in addition to its plans to Twist $45 billion worth
of Treasuries per month: a total monetization scheme of $85 billion.
However, since that time, the
Fed’s balance sheet has increased just $3 billion.
Now, it takes several weeks
for MBS transactions to settle, so the Fed will announce its MBS purchases
since QE 3 started today at 2PM. But if that number is lower than $37 billion
(how much the Fed should have bought in the last four weeks) then the Fed
lied about QE 3.
In addition to this
development, I want to draw your attention to the fact that the Fed balance
sheet is DOWN $50 billion year over year. This confirms that the Fed has in
fact been engaging in mostly verbal intervention over the last year
rather than actual monetary intervention.
The implications of this are
of major import.
For one thing, it indicates
that the market rally on hopes of more Fed juice is in fact based on a myth.
The primary driver of all stock moves has been based on hopes of more liquidity
from the Fed and other Central Banks. But the Fed’s balance sheet indicates
that this hope is not based on fact. That does not bode well
for the bulls.
A second implication concerns
the multi-trillion Dollar question: whether the Fed has in fact used up its gunpowder
with all of its monetary schemes. After all, the market is roughly break-even
since the Fed announced QE 3. Could it be that the market is no longer reacting
to Fed action?
If that is the case, then the
Bernanke put is over.
These are
items to be watching for. We’ll find out the details of the Fed’s actions in an
hour or so. But the tide may in fact be turning regarding the success of the
Fed’s actions in pushing stocks higher.If you’re looking for specific
investment ideas on how to trade the market, I highly recommend my Private
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the markets…Click Here Graham Summers