On the heels of what has been a wild first few days of trading in February, this is why the Dow just plunged another 650+ points.
End Of QE
By Peter Boockvar, author of the Boock Report
February 8 (King World News) – Here is what Peter Boockvar wrote as the world awaits the next round of monetary madness: While I don’t see how the Bank of England voted 9-0 to leave their benchmark rate at .5% while CPI is running at 3% with a straight face, they are doing what central bankers do. Instead of surprising us, they are laying the groundwork for a sooner than expected hike. They said “monetary policy would need to be tightened somewhat earlier and by a somewhat greater degree over the forecast period than anticipated at the time of the November report.” The underline is mine…
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Boockvar continues: They said this because “the prospect of a greater degree of excess demand over the forecast period and the expectation that inflation would remain above the target have further diminished the trade off that the MPC is required to balance.” In response, the pound is spiking by almost 1% and is back to $1.40 vs the dollar. The 2 yr Gilt yield is up a sharp 7 bps to .70%, the highest level since November 2015. The 10 yr is up by 6 bps and this action in bonds led to an immediate selloff in bonds throughout Europe and the US 10 yr is back at 2.85% after sitting at 2.83% just prior to the BoE announcement. I’ll say again, the interest rate times they are a changin. As for the BoE, they are so far behind the inflation 8 ball but are at least are now realizing it and the damage it has done.
The possible next President of the ECB, German Bundesbank President Jens Weidmann is again calling for the end of QE after September…Lastly, we saw yesterday that Investors Intelligence reflected a less bullish but hardly bearish take on investor sentiment. Today, the always very volatile AAII figure saw Bulls fall 7.7 pts to 37 while Bears were up by 6.3 pts to 35. The Neutral side was up by 1.5 to 28. We can call this in the aggregate, the “I Don’t Know Crowd.”
King World News note: When you see the Dow tumbling another 550 points today, this is all part of the recognition that we have finally come to the end of QE and valuations of stocks are in the stratosphere. That leaves a great deal of room to the downside for stocks, even though some are calling this “a buying opportunity.” As for gold and silver, they will benefit in the medium- to long-term from a bear market in stocks.
ALSO RELEASED: Wild Trading To Kickoff February But This Will Be The Big Surprise For 2018 CLICK HERE TO READ.
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