Quantitative Easing Explained

[onlooker]

Oops!  I just found answers to my question.   

See: 

Exclusive: Bill Gross Dumps All Treasuries, Brings Total "Government Related" Holdings To Zero, Flees To Cash - No QE3?

And many thought Bill Gross was only posturing when he said he is getting the hell out of dodge. Based on still to be publicly reported data by Pimco's flagship Total Return Fund, the world's largest bond fund, in the month of January, has taken its bond holdings to zero (and -14% on a Duration Weighted Exposure basis). The offset, not surprisingly, is cash.

Submitted by Tyler Durden on 03/09/2011

http://www.zerohedge.com/article/exclusive-bill-gross-dumps-all-treasuries-brings-total-government-related-holdings-zero-flee

See:  Bill Gross: Who Will Ultimately Finance Uncle Sam And At What Rate?By Larry Doyle on March 3, 2011

The markets clearly enjoy the calm and palliative benefit of Ben’s big checkbook BUT when he stops writing those QE checks, the risks currently beneath the surface will once again bubble to the top. Gross provides great work here highlighting that reality.

Navigate accordingly.

http://www.dailymarkets.com/stock/2011/03/03/bill-gross-who-will-ultimately-finance-uncle-sam-and-at-what-rate/

[MetalMeister]

OL,

To the casual observer, those two articles are probably not interesting to them at all.

To me, they are ALARMING!

Thanks for posting them!!!!!

Give us more of your thoughts, please.

Thoughts EVERYONE?

 

[onlooker]

MM,

I see Bill Gross as being very unlike American ex-pat, Jim Rogers.  Because Bill Gross placed a substantial part of his wealth in US Treasury Bonds, I see him as a diehard America patriotic to his government.  But, it appears that Bill Gross has his limits and now, realizes that he has to abandon Uncle Sam to save his wealth.

It's reported that he dumped all his treasuries bonds for cash.  I assume he, will soon join other American smart money like David Einhorn or Thomas Kaplan who exchanged their dollars for precious metals.

~   ~    ~   ~     

If there is no QE3, then I think I should not be in the markets.  However, unlike Bill Gross, I think there will be a QE3.

There have been times in the past when the economy was going flat, and suddenly there was a war and the economy was stimulated.

Currently, there’s a Middle East crisis and there’s fear that the DOW is at a tipping point.  Humm?  Coincidence? 

Let’s see what happens in the next couple of months.  Funny, I think I have more faith in Uncle Sam than Bill Gross.   

[MetalMeister]

I'm ignorant.

Tell me more about Einhorn and Kaplan...   

[onlooker]

MM,

You ignorant?  Nah, I don’t think so.

See:

David Einhorn's Greenlight Capital switched his holdings in GLD gold ETF into bullion

2009-07-15

July 14 (Bloomberg) -- Greenlight Capital Inc., the $5 billion hedge-fund firm run by David Einhorn, told investors it switched all of its holdings in a gold exchange-traded fund into bullion during the second quarter.

“At a minimum this will provide some savings as the costs of storing gold are less than the fees” for the SPDR Gold Trust, the New York-based firm said yesterday in a letter to investors.

Einhorn, 40, told clients in January he was buying gold for the first time amid the threat of inflation from higher government spending. The firm, started in 1996, held 4.2 million shares of SPDR Gold Trust in the first quarter, making the gold- backed ETF its biggest holding.

http://realitylenses.blogspot.com/2009/07/david-einhorns-greenlight-capital.html

See:   

A Billionaire Goes All-In on Gold

By LIAM PLEVEN And CAROLYN CUI     MAY 22, 2010

But few individuals stand to benefit as much as low-profile billionaire Thomas Kaplan. A New York-born commodities magnate who earned a doctorate in British colonial history at Oxford, Mr. Kaplan oversees an empire devoted largely to gold.

Many fund managers and high-rollers have allocated small percentages of their portfolios to gold as a hedge against inflation. But Mr. Kaplan is the bull of bullion. He has gone further than perhaps any other major investor, betting the majority of his wealth on gold and other precious metals. And it reflects his deeply held conviction that global economic instability could bring rising demand for gold.

Through his firm, Tigris Financial Group, and affiliates, Mr. Kaplan has loaded up on bullion and bought up properties in 17 countries on five continents, where geologists are exploring for more. Tigris subsidiaries have taken stakes in mining companies, including tiny firms that have yet to produce an ounce.

Though he won't disclose how much physical gold he owns, Mr. Kaplan, who is 47 years old, controls up to 30% of the shares in some so-called junior miners. Together, his holdings amount to a nearly $2 billion bet on gold, more than the Brazilian central bank's bullion is currently worth.

"I've reached a point where I feel the only asset I have confidence in is gold," Mr. Kaplan said in an interview at Tigris's midtown Manhattan headquarters.

http://online.wsj.com/article/SB10001424052748704167704575258783702875778.html

[sunseeker]

I'm ignorant.

Tell me more about Einhorn and Kaplan...  

Hi MM

This might interest you.....
http://www.gurufocus.com/

http://www.gurufocus.com/ListGuru.php?GuruName=David+Einhorn

http://www.gurufocus.com/StockBuy.php?GuruName=David+Einhorn

Free limited access accounts and email updates available.

I only just found out today that KCAST is now available for “Windows 7”.

http://applications.kitco.com/supportcenter/windows/windows-support.html


Hurray.  

It's free to use too.

I really missed being able to see all the precious-metals prices automatically updating at the bottom of the screen. It used to refresh every 15mins but now it can be set to every 30 secs. That enables you to keep an eye on the spots whilst looking at the companies,reading emails, or looking for other things.

Off out soon (no mention of f%d or D£!nk)....  
Then off to the theatre to see a comedian.

ATB  

[onlooker]

OL:

Why is nobody Dennis Lockhart being quoted?   There’s chaos in the Middle East.  Need an emergency plan to stop oil prices from rising!  Do a QE3!

This sounds like a setup for another emergency round of QE and a diversion for the real purpose of having QEs.  SOS America’s banking system.  

~       ~       ~

Jim Rickards on kingworldnews explains what the Fed is doing with QE.

Jim Rickards says:

As a child, I was confused by shouts of “The King is dead, long live the King!” I understood the declaration about the deceased king but didn’t understand why you would then wish long life to a dead King. Only later did I come to understand the distinction between the King who had just passed and the heir who had just ascended to the throne. Then it all made sense.

As we approach the end of the Fed’s quantitative easing program many are prepared to shout, “QE is dead!” Few realize the old royal salute is more appropriate – “QE is dead, long live QE!” Because an heir to the throne is here and will be with us for a long time. QE has now become a permanent part of the financial landscape of the United States.

The reason is that the size of the Fed’s balance sheet is now so vast that the reinvestment of principal payments from the existing assets will be enough to monetize a large portion of the Federal deficit without having to increase the total size of the balance sheet.

Listen to:  Jim Rickards   March 12, 2011

http://kingworldnews.com/kingworldnews/Broadcast/Entries/2011/3/12_Jim_Rickards.html

See:  http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/3/11_Jim_Rickards_-_QE_is_dead,_long_live_QE%21.html

[MetalMeister]

SS, thanks for the GURU site.  Nice one to keep up with the Jones'....

OL, thanks for the Rickards interview.

As you can see I just have not had much time lately and I depend on you guys keeping me focused lately at these late night hours.  1:31am here.

[onlooker]

QE II will end in June 2011, but let’s not forget about the upcoming 2012 US election.

See: 

April 4, 2011: President Obama Formally Launches 2012 Re-election Bid
http://historymusings.wordpress.com/2011/04/04/president-obama-formally-launches-2012-re-election-bid/

Obama and Democrats are already in re-election mode.  In mainstream media, Obama is currently being hailed as a hero for bringing down OBL.
     
See:

Bin Laden's death could redefine Obama's presidency and potential re-election Produced by Eight Forty-Eight May. 03, 2011
The death of Osama bin Laden at the hands of U.S. Navy Seals is to many a slam dunk – a clear victory for U.S. foreign policy. It might also prove a turning point for President Barack Obama who has been criticized for his lack of military experience.

http://www.wbez.org/episode-segments/2011-05-03/bin-ladens-death-could-redefine-obamas-presidency-and-potential-re-elect

[onlooker]

In order for Obama and company to remain in power, I think there must eventually be a QE III. 

The Fed Will Make Sure Obama Wins in 2012: Strategist
Thursday, 28 Apr 2011
By: Patrick Allen

As we approach next year's presidential elections, the chances of President Barack Obama being ousted by a rival from either side of the political divide are low, according to Thanos Papasavvas, the head of currency management at Investec Asset Management.

“History is very much on the side of the incumbent President and unless we have a double-dip recession with a significant increase in unemployment I don’t believe Obama will lose 2012,” Papasavvas said in an interview with CNBC on Thursday.

“On the economic side, any signs of a deteriorating economic environment will see the Fed enacting QE3 (the third round of quantitative easing, or creating money) and hence indirectly reducing the probability of the economy derailing Obama,” Papasavvas added.

http://www.cnbc.com/id/42794512/The_Fed_Will_Make_Sure_Obama_Wins_in_2012_Strategist

[sidewinder]

I didn't think there was ever any doubt as to a QEIII.  Or for that matter a IV or V. 

This is all the Keynesian's know.  BUT, what will they do when inflation becomes so apparent the farmers show up with pitchforks.  They will continue to "massage" the numbers until it will be "there was only .2% inflation" (if you don't count food and fuel) to  "there was only .2% inflation" (if you don't count food, fuel and non durable goods )  to "there was only .2% inflation" (if you don't count food, fuel, non durable goods, medicine, durable goods and utilities )  well ..... you get the picture. 

As long and they can pull the wool over the majority's eyes, piss down their backs and tell them it's raining it's business as usual and the stock market will climb. 

GOT GOLD?

[onlooker]

“There are no random acts...We are all connected...You can no more separate one life from another than you can separate a breeze from the wind...”                                                                                                      
                                                                                                                                      Mitch Albom, Author

~     ~     ~     ~    ~    ~

On one side of the Atlantic, this has happened:

See: 

European Central Bank injects euro 489 billion into eurozone banks
22 Dec, 2011

FRANKFURT: Banks took a huge euro 489 billion at the European Central Bank's first ever offering of three-year funding on Wednesday, raising hope a credit crunch can be avoided and that the money may be used to buy Italian and Spanish bonds. A total of 523 banks borrowed money at the tender with demand way above the euro 310 billion expected by traders polled by Reuters in the run-up to the operation.

The banks' lunge for funding pushed the euro to a one-week high versus the dollar and sparked a rally in stocks. The three-year loans are the ECB's latest bold attempt to ease the eurozone's troubles. It is the most the bank has ever pumped into the financial system, topping the near 450 billion it injected with its first one-year loans back in 2009.

http://economictimes.indiatimes.com/news/international-business/european-central-bank-injects-euro-489-billion-into-eurozone-banks/articleshow/11201376.cms

Here are some analyses on how the European bailout could affect the markets on both sides of the Atlantic.  Especially read all of John Embry’s market analysis.  He could be right about why precious metals went down at the end of 2011, and what their future prices could be in 2012.

See:   

Are We Seeing Stealth Quantitative Easing With A European Twist? (UUP, UDN, FXE, VGK, EUO, IEV)
January 22nd, 2012

Over in Europe  (NYSEArca:IEV), central bankers and other policy makers griped about the impact the Fed’s money printing had on commodities and the threat a falling dollar posed to their export industry. And more recently, several policymakers publicly disavowed money-printing as a strategy to combat the sovereign debt crisis.

Yet late in 2011, the European Central Bank (ECB) conducted the first of two planned long-term refinancing operations, or “LTROs.” The scheme flooded banks with 489 billion euros of cheap money, which they were “strongly encouraged” to use to buy sovereign bonds. The second LTRO is scheduled for next month, and there’s talk we could see 1 trillion euros (NYSEArca:FXE) — or more — in demand.

As a result of the LTRO and other ECB moves to combat the crisis, its balance sheet has exploded in size — to 2.67 trillion euros ($3.42 trillion) from 1.95 trillion euros ($2.5 trillion) just 6 months ago. The Fed’s balance sheet, by comparison sake, has ballooned to $2.9 trillion. That compares to $924 billion before the Lehman Brothers crisis.

Long story short: All signs point to the ECB pursuing — in a roundabout way — the same strategy the Fed did before it!

QE-E Sure to Fail Just Like Ours Did!

Albert Einstein supposedly said the definition of insanity is doing the same thing over and over again, and expecting a different result. But it looks like central bankers the world over haven’t gotten the memo.

Despite the failure of two rounds of U.S. QE to stimulate the economy in a lasting meaningful way … and the failure of two rounds of QE in the U.K. to accomplish anything either … we now appear to be getting “QE-E” — QE in Europe (NYSEArca:VGK).

It’s guaranteed to fail miserably if history is any guide. But it could also continue to inflate the asset markets short term, and drive the value of the euro currency (NYSEArca:EUO) even lower — just as U.S. QE drove the dollar down (NYSEArca:UDN). So keep those trends in mind when you’re picking your investing spots!

http://etfdailynews.com/2012/01/22/are-we-seeing-stealth-quantitative-easing-with-a-european-twist-uup-udn-fxe-vgk-euo-iev/

Some experts from John Embry:

Machinations to blame for end-of-year slide
February 3, 2012

Despite Europe’s problems, central banks on both sides of the Atlantic intervened to prevent gold from becoming an alternate currency.

This process (bailouts) will accelerate the debasement of all fiat currencies.  But it will also cause investors to realize they need more real money, preferably in physical form.

This will have a remarkable impact on the price of the metal – so much so that my price prediction might prove conservative.

That most of the western world doesn’t yet grasp the reality is wildly bullish for gold.

http://www.sprott.com/media/104644/ID-Feb-3-2012.pdf

[sidewinder]

Those are good and valid assessments onlooker ........ thanks

[onlooker]

More articles on possible consequences of QE injections into the current electronically, borderless (and “smelly” as correctly penned by JDH) global markets.

See: 

Trader Dan's Market Views

Sterling Gold surging Higher
Wednesday, February 22, 2012

Gold priced in terms of the British Pound is surging higher being reinforced in its upward trajectory by news that the Bank of England was further expanding its bond purchase program (Read this as its version of QE). This is more evidence that nearly the entirety of the Western World Major Central Banks are completely engaged in the process of adulterating their currencies.

http://www.traderdannorcini.blogspot.com/

See: 

Eric de Groot’s Insights
Dow Jones hits 13,000: Time to invest? (very cautiously)
February 23, 2012

Does anyone remember a similar debate at Dow 10,000? Better yet, does anyone still have one of those Dow 10,000 hats? I realize that the media, i.e. headlines, love to equate rising stock prices with an improving economy, but the two don't always coexist. A stock market can just as easily rise as a result of infinite liquidity driven by currency debasement as it can from improving economic conditions. Dow 13,000, just like Dow 10,000, don't necessary convey the same message when the unit of measurement, better known as currency, changes over time.

As I discussed several weeks ago, surging market internals strongly hinted that the stock market was heading higher. The spinsters will certainly use the rally to manage economic perceptions.

As with most things, it’s what the spinsters selective ignore that often does the most damage. While stock prices will rise, they will do so in a rising gold environment. Cycle analysis predicts gold will outperform. Why? While liquidity driven rallies lift all boats, they tend to favor gold (see chart).

History tends to be the best teacher.

http://edegrootinsights.blogspot.com/2012/02/dow-jones-hits-13000-time-to-invest.html

~    ~    ~

SW:

It always makes my day when I get praise from a veteran market chartist.   

[MetalMeister]

Good article giving the outlay for the next 10 years of US debt.

I think the timespan is shorter as foreign governments are starting to move out of US debt and that will accelerate as the Euro crisis deepens.

http://www.silverbearcafe.com/private/04.12/hitsthewall.html