Today UBS legend, Art Cashin, warned that yes, the Fed is in fact engaged in QE, and it is larger than it was in 2013.

QE: Yes, And Larger Than 2013!
October 16 (King World News) – Art Cashin:  A Signal From The VIX – The always insightful Jason Goepfert of SentimenTrader noted this in his letter overnight: 

Low vol. The VIX closed below 14 for the first time in three weeks. Since 1990, this has led to gains in the S&P 500 over the next 6-12 months 27 out of 28 times. 

Quantitative Easing? – Several weeks ago the Fed repo market virtually exploded, shooting overnight rates spectacularly higher, well, well above the Fed’s target rate. 

Appearing puzzled about the cause, the Fed announced it would add about $65 billion a month to provide liquidity for the short term market. 

When he announced the added liquidity, Chairman Powell protested over and over again that this was not a restart of QE and should not be assumed to be QE. 

With the help of some friends, I checked back to see what QE looked like. Back in 2013, when QE was at full throttle, the Fed was inserting about $85 billion a month. Yes that is larger than the current $65 billion but there is more to the story. 

The whole $85 billion didn’t go into Treasury bills. Forty-five billion went to bills, while $40 billion went into mortgage backed securities. Today the whole $65 billion goes into bills, making this bigger than the old QE. 

So, let’s review. In QE, the Fed bought treasury bills. Each month they now buy more treasury bills than they ever bought in QE. So what exactly is different? 

The answer – nothing mechanically. They are both identical. Only the announced goal is different. 

Further, some think that the repo problems may not be about liquidity. It may be about new personnel or policies on the repo desk itself. We’ll see. 

Overnight And Overseas – In Tokyo, stocks rallied smartly, building on the solid rally seen yesterday. In China, markets were mixed. Hong Kong rallied, while Shanghai saw a moderate selloff. India closed with a modest rally. 

Renewed Brexit doubts are bringing slightly lower equity prices in London, Paris and Frankfurt. 

Among other assets, Bitcoin is slightly softer, trading around $8150. Gold is a touch firmer but is still below $1500. Crude is trying to stabilize with WTI trading just below $53. The euro is flat against the dollar and yields are unchanged. 

Consensus – Brexit appears to have hit another bump in the road. Hong Kong may complicate the trade talks. 

Stick with the drill – stay wary, alert and very, very nimble.

KWN has just released the powerful audio interview with Egon von Greyerz and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.

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