Wednesday, October 27, 2010

QE2 Temper Tantrum Pressures Stocks

"Waaahhh!...Waaaah!..Waaaaaah! I want a bigger QE2!!!"

What a bunch of Wall St cry babies. 

Bonds are selling off despite the big dump in equities as Wall St cries like a little bitch following the news that the Fed's QE may be less than spectacular.

Read Bill Gross's shocking piece today if you want to know why the Fed is reigning in QE2.  It doesn't take a brain scientist to figure out why QE won't work.  It may help the banks stay afloat for awhile longer, but it does nothing to help Main St.

I don't know about you but I think the banks have gotten enough help.

Here's Bill's piece in a nutshell:

"The Fed’s announcement of a renewed commitment to Quantitative Easing has been well telegraphed and the market’s reaction is likely to be subdued.

We are in a “liquidity trap,” where interest rates or trillions in asset purchases may not stimulate borrowing or lending because consumer demand is just not there.

The Fed’s announcement will likely signify the end of a great 30-year bull market in bonds and the necessity for bond managers and, yes, equity managers to adjust to a new environment."

My Take:
Week by week the Fed's policies and foreclosuregate are slowly being thrown under the bus by the people who matter on Wall St.
The rotten smell of fraud on the street has became so foul that it could no longer be ignored by the big players.  It's becoming clearly evident to Bill and others that it's time for them to bail on both the Fed and the TBTF banks.
This is clearly evident by Gross's scathing analysis of the Fed in the letter above.  More evidence of this rejection was seen last week as the NY Fed, Blackrock, and PIMCO sued Countrywide.

The Bottom Line

The bond vigilantes appear to be making a statement around the Fed's QE2.  The question is are they rejecting the idea all together or are they saying it's not enough?

We'll have a better idea as to what message they are sending when we get the FOMC statement later this week.

Back later for more later and hold on tight today.  Gobble Gobble Bill Gross!


getyourselfconnected said...

Gross says QE is ponzi-like but what else can be done? Great way to look at it.

Jeff said...


I know how much u despise him. I am a fan. Pimco is one of the best firms out there. He sadly is right. There is no answer other than a failure of the financial system. That's the alternative.