SocGen Explains That Since The ECB’s QE Will Fail, It Will Need To Be Increased To €3 Trillion, Include Stocks
Submitted by Tyler Durden on 01/22/2015 – 11:27
“The potential amount of QE needed is €2-3 trillion! Hence for inflation to reach close to a 2.0% threshold medium term, the potential amount of asset purchases needed is €2-3tn, not a mere €1tn. Should the ECB target such an expansion of its balance sheet, it would have to ease some conditions on its bond purchases (liquidity rule, quality…) or contemplate other asset classes- equity stocks, Real Estate Investment Trust-(REIT), Exchange-traded fund (ETF)…- as the BoJ, previously.”
Submitted by Tyler Durden on 01/22/2015 – 14:09
With almost perfect comedic timing,Bloomberg unleashed the mainstream media’s Draghi-confirming raison d’etre for QE… explaining why – shock horror – deflation is bad for you. No matter that the QE efforts of The Fed (and BoJ) entirely (totally and utterly) failed to spark any increase in inflation expectations, we must try try try again. However, despite the exuberant disgruntlement with deflation that Bloomberg offers, Portuguese economy minister Guindos had something ‘odd’ to say this morning: “European deflation is positive.”We are sure he will issue some clarifying statement soon enough walking back such a dangerous and anti-authority comment.
Submitted by Tyler Durden on 01/22/2015 – 13:46
“Davos Man… derives most of his income, directly or indirectly, from state patronage.Davos is a place where you see, in Marxist terms, is a gang of rentiers coming together to devise new means to live off the sweat of the workers…It’s like an Ayn Rand novel, where lobbyists reach cosy arrangements with each other in elliptical language.“
Submitted by Tyler Durden on 01/22/2015 – 13:24
In an awkwardly uncomfortable non-cheerleadery few minutes on CNBC this morning, he-who-must-be-listened-to (when he is buying stuff and not selling it) – Carl Icahn – dropped a few truth bombs on an unsuspecting Scott Wapner. Starting withwarnings about energy sector debt, fearing a surge in defaults and “what management can do to hurt you” if you own that debt, Icahn then moved on to discuss today’s ECB move and its implications. Confirming his “extremely cautious” stance to the overall market, Icahn explained how “the reason the stock market has gone up is because of the Federal Reserve,” and now the rest of the world is jumping on the bandwagon “with all this issuance of money,” and the implicitly strengthening USDollar “will come home to roost at some point.” While not pointing to a specific point in time, Icahn concluded, “you do have to be extremely cautious and we have hedges on.. and it’s too early to buy oil stocks/bonds.”
The Euro Crashes To 12 Year Lows And Now The US Commerce Secretary Starts To Grumble About A Strong Dollar
Submitted by Tyler Durden on 01/22/2015 – 12:57
A crashing Yen failed to help Japan or fix its economy, but while Japan may now be a lost cause, the Keynesian masterminds of the world will give it another try, and following today’s Draghi’s announcement, the EURUSD has crashed to the lowest level since 2003, tumbling over 200 pips, and printing below 1.14 moments ago. However, in a clear indication that the party for the USD-bulls may be ending, none other than the US commerce secretary moments ago said the impact of a rising dollar on exports and economic growth bears monitoring.
Submitted by Tyler Durden on 01/22/2015 – 12:51
In the short space of an hour – following weeks of battles and a recent standoff in Sana’a with Houthi rebels – all the well-laid plans of the US manipulators has gone astray:
*YEMEN GOVERNMENT RESIGNS, PRIME MINISTER PRESENTS RESIGNATION TO PRESIDENT AMID REBEL STANDOFF
*YEMEN PRESIDENT HADI HAS RESIGNED, AIDE SAYS
This comes after signing a short-term peace deal following an admission that they had lost control. And with oil-prices plunging once again, which means social instability in the middle east is about to explodemaking the Arab spring of 2011 seem like child’s play by comparison, things around the globe are about to take a dramatic turn for the worse.
Submitted by Tyler Durden on 01/22/2015 – 12:23
Everyone knows the positives, or rather positive, even if nobody at the ECB is willing to come out and say it: the ECB’s QE – whose structural details were laid out previously – will boost stock prices, and… that’s it. Who benefits as a result of this has now become a socioeconomic and philosophical discussion. So here, courtesy of ADMISI’s Marc Ostwald, are the negatives.
Submitted by Tyler Durden on 01/22/2015 – 11:59
If speeches like the State of The Union this week, and the reactions to it, make anything clear, it’s that the PR guys won the fight against critical thinking. All you need to do is get people to believe whatever it is you got for sale. And 99.9% of people are easily fooled. That’s how you define democracy in 2015: how many people can you fool? Which is the most convincing sleight of hand?
Submitted by Tyler Durden on 01/22/2015 – 11:03
With NATO’s top military commander, General Breedlove, proclaiming that fighting in Ukraine is worse than pre-truce levels (and noting he could not confirm Poroshenko’s Russian force numbers accusations), the news overnight, as The Telegraph reports, that Ukrainian forces appeared to withdraw from Donetsk airport last night, ending an 8-month battle in a bitter blow for pro-Kiev forces and apparent triumph for the Russian-backed separatists they are fighting. While the Pro-Russian separatists’ Pyrrhic victory over the completely destroyed (as we noted here) airport may be a blow, a Ukrainian military spokesman on Thursday played down the surrender of the terminal buildings, saying it was simply a tactical withdrawal. Additionally, Russia has denounced an attack on a bus in separatist-held Donetsk which killed civilians as a “monstrous crime.”
Submitted by Tyler Durden on 01/22/2015 – 10:42
Those curious to learn why Greece is the only country excluded form the ECB’ QE (for now), will not find any additional information in the ECB’s supplement on its asset purchase program. Neither will they learn why something that is in effect monetary financing, and is prohibited by Article 123, is not monetary financing. However, they will learn that the proceeds from the ECB’s money printing can be used “to buy other assets and extend credit to the real economy.” The ECB adds that “In both cases, this contributes to an easing of financial conditions.” Actually the only thing it will contribute to is making the world’s billionaires into the world’s trillionaires.
Submitted by Tyler Durden on 01/22/2015 – 10:36
Well so much for ECB QE sparking economic growth and inflation expectations… And thenEIA confirms last week’s crude oil inventory build was the largest since 2001! WTI is now nearing a $45 handle once again…
Danish Central Bank Just Cut Rates For A Second Time This Week; Intervenes In Market To Preserve Peg
Submitted by Tyler Durden on 01/22/2015 – 10:12
It was just on Mondaywhen the Danish central bank, clearly panicking about the peg of the Danish Krone to the EUR, surprised the world when in an unexpected rate cut it went NIRPer, sending its deposit rate from -0.05% to 0.2%. Moments ago it doubled down with its second rate cut for the week, this time sending the rate from -0.20% to -0.35%. At this rate we should hit -0.5% next Tuesday and be well into the -1% territory two weeks from today. And not only that, but as Bloomberg observes, “The Danish central bank “also seems to have been intervening in the market prior to the ECB meeting,” Jes Asmussen, chief economist at Svenska Handelsbanken AB in Copenhagen.” In other words, the Danish Krone’s peg days are most likely numbered.
Submitted by Tyler Durden on 01/22/2015 – 09:53
After over 2 years of dragging, pardon the bad pun, the market by the nose, ever since his “whatever it takes” speech in July 2012, Draghi finally folded and launched QE. This, as Credit Suisse warned last week, and as stocks are starting to realize, may have been the longest “sell the news” build up in history. Of course, CS worded it more poetically: “the QE Dream becomes reality”and far more importantly, as it also adds: “the dream may prove far more powerful as a market driver than the reality.”
Submitted by Tyler Durden on 01/22/2015 – 09:36
30Y US Treasury yields have collapsed over 14bps since Draghi unleashed QE… and US equities now well in the red post-QE. Not exactly the kind of risk-on “buy buy buy” everyone was hoping for as European Peripheral bond risk spreads are rising…
ECB QE Reaction: “Disappointment” – Crude Clubbed, Gold Glistens, EUR Tumbles, EU Bond Risk ‘Rises’, US Treasuries Rally
Submitted by Tyler Durden on 01/22/2015 – 09:31
UPDATE: EURUSD < 1.15 but peripheral bonds selling off;EURCHF is dumping
Initial kneejerk reactions have started to fade but overall Europe is ‘positive’ as EURUSD is lower and stocks higher (excepty Germany’s DAX which is at the LoD) but Sovereign spreads are higher. Initial exuberance in US equities have been entirely erased. Treasury yields are now lower as gold and silver are bid and crude and copper sold. We’re gonna need a bigger bazooka Mr.Draghi…