Euro 50 flips Draghi the Bird, S&P 500 fails at a key parameter, Semi’s are fundamentally bearish and Gold has a sentiment washout within its bear market.
Despite Janet Yellen’s protests to the contrary, the 7 year long asset market bailout (ZIRP + QE’s 1, 2 & 3 with a side of Operation Twist) has served to further enrich formerly troubled asset holders and provide a handy wealth effect for regular 401k holders to boot.
It’s great as long as things stay so symmetrical that even a linear-thinking, professionally trained economist can understand it.Indeed, Mario Draghi has been implementing a ‘me too!’ QE plan in Europe in order to more or less ape the success that is the US bond market err, management program. Fed Funds interest rates at zero, pinning T bill yields to the mat and encouraging banks to borrow for free and lend at interest, Quantitative Easing in various forms sanitizing inflation signals and literally painting the macro backdrop as desired.It all seemed so easy, so unquestioned by the market.
There have been no obvious repercussions… until today. The Fed had previously been able to print US dollars aplenty to buy distressed MBA and Treasury bonds (before finally terminating the operation) and hold interest rates at ZERO, years into an economic expansion ostensibly to bail out regular people. Get this, it was institutions from Wall Street banks to mortgage companies to asset speculators to the Fed itself, that created the edifice of debt and leverage that fomented the “Great Recession” (a nice nickname, implying it is safely in the past) and now Janet Yellen argues that the Fed was acting to protect regular people by denying them their interest on savings? That’s a good one.
Moving on, I listened to her speak today and as I thought about Ben Bernanke, I think she comes off as a decent sort. But the all-knowing, all-powerful status that market participants (including the black boxes, which I assume are programmed not to question) have assigned to these people is incredible. In my opinion, official policy makers are the same dullards they have always been, but a hallmark of the post-2011 phase has been ironclad confidence in the Federal Reserve.It can’t all be black boxes, can it? Let’s call it a financial fascism, which has gripped the markets and served the Fed’s agenda very well.
Until today. Today the Euro STOXX 50 flipped Mario Draghi the bird, the Euro launched and the US dollar, despite the well-telegraphed US rate hike set for December 16, got harpooned. Maybe it was just a contrary play in the markets, putting the now-bloated deflation/dollar bull camp off sides (USD is in a cyclical bull market, after all) in a massive display of Euro short covering and corresponding USD selling.
