It was a wild night of trading, plus a look at the endgame.
It Was A Wild Night
October 10 (King World News) – Peter Boockvar: “If you didn’t happen to see, It was a wild night in the S&P futures with a decline of about 30 pts when there was talk of the Chinese delegation cutting its trip early by a day. That was denied and we rallied back to almost unchanged only to fall back by about 25 pts and now to sit close to the flat line on chatter that we would allow some buying of non essential products to Huawai and separately on some sort of currency deal and soybean buying in return for taking off the recently implemented tariffs and delaying others…
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I’ll say this, unless we get something substantive on IP, what a waste of another cross world trip. That said, its seems the administration will use any deal they can get in order to delay more tariffs because they’ve finally acknowledged the self damage they do, especially the recent ones on consumer products.
There is a lot of debate on whether what the Fed is now doing with their balance sheet is QE or not, similar to what they did in three different rounds. I’m of the opinion that buying T-bills in order to control the fed funds rate is just modern day open market operations and nothing more. This is night and day with their previous QE attempt at suppressing long term interest rates (and which actually rose after they tried). As you can see in the chart in the years before any of us ever heard of QE that the Fed’s balance sheet organically grew. This was an annual rate of around 5% which was about the same as the rise in nominal GDP. (See below).
The Endgame In Japan & Europe
You know I’ve been arguing that we are at an endgame with monetary policy in Japan and Europe because of the damage done to their banks. Yesterday the Vice President of the ECB Luis de Guindos, the 2nd in command to Draghi and the soon to be head Christine Lagarde, said “Although we can reduce interest rates further, the side effects of monetary policy are becoming more and more evident and more and more tangible. That’s why we have started to say that other actors have to jump in.” The German 10 yr yield after rising by 4.5 bps yesterday is up another 3 bps today to -.52%, the least negative in 3 weeks and European banks are rallying. US Treasury yields are rising in sympathy. The euro is rising as well to back above $1.10.
Gold & Miners, Big Surprise, Plus No Inflation?
READ THIS NEXT! Gold And Mining Stock Update, “Japanification” Of The World, Central Planners Big Surprise, Plus No Inflation? CLICK HERE TO READ
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