Liquidity 02 incl QE, Twist, LTRO, APP etc (Jun 14 - Dec 25)

[winston]

"Asset fundamentals are weak, but the market does not move in line with fundamentals.

It’s now more of excess liquidity from unconventional monetary policies, which is driving up asset prices as funds seek to maximise their short-term returns."

Kelvin Wong
Chief Technical Strategist
City Index

[winston]

Central Banks Might Just Be Crazy Enough for Helicopter Money

By Rodney Johnson

If a $20 billion plan in Japan, or $200 billion plan in the U.S. or Europe, doesn’t do the trick, what would the bankers do next?

Admit that their logic was flawed and look for another way to address their problems, or double down… then triple down… then, well, you get the picture.

From around 2012 onwards, some economists began advocating variants of helicopter drops, including 'QE for the people', and a 'debt jubilee' financed with the monetary base.

Citizens, investors, or anyone else tied to a currency subject to a helicopter-money program would instantly be fearful of serial cash printing and giveaways, and therefore long-term devaluation of their holdings.

The prudent move would be to exit the currency as quickly as possible. That might sound wonderful to a country like Japan, or even the U.S., where weaker currencies and inflation pressures would be welcome, but too much of anything is poisonous. There is no way to put the free-money genie back in the bottle. No one in their right mind would trust central bankers to self-regulate or admit failure.

In this sense, helicopter money is the nuclear option. It is without precedent in developed nations, has had disastrous effects in smaller economies when used to prop up governments, and there is no way to curb such programs once they begin.

So far, officials in Japan and elsewhere claim they aren’t seriously considering such moves. But that’s what they said about negative interest rates in years past. Let’s hope for our own sake that this time around they stick to their word.

Source: Economy & Markets

[winston]

The Most Disturbing Thing Central Banks Are Doing Right Now

by MICHAEL LEWITT



Source: Sure Money

http://suremoneyinvestor.com/2016/09/th ... right-now/

[winston]

Here's the Terrifying Endgame of Global Central Banking

By SHAH GILANI

Rather than admit defeat and wind up their policies, central bankers are doing the unthinkable – and they're planning on doing a lot more of it.

They're buying government bonds and mortgage bonds. Some central banks are going so far as to buy corporates, too.

But worse, some central banks are increasingly buying stocks.

According to the Swiss National Bank's (SNB) web site, it's allocating a full 20% of all its foreign currency reserves to stock investing.

The Bank of Japan, as reported by Bloomberg, "ranks as a top 10 holder in more than 200 of the Nikkei gauge's 225 companies."

The ECB is considering buying stocks, and the U.S. Federal Reserve hasn't ruled it out.

Source: Money Morning

http://moneymorning.com/2016/10/31/here ... l-banking/

[winston]

Trump and the coming of helicopter money

Source: Daily Crux

http://thecrux.com/jim-rickards-trump-a ... ter-money/

[winston]

Unlimited QE

In September the Jaoanese announced that they would peg the Japanese ten-year government bond yield at ZERO

At that time, rates were deeply into negative territory. In that respect, it was actually a removal of monetary stimulus in the near term--the opposite of the what the market was hoping for, though few seemed to understand the concept.

I talked about it earlier this month as an opportunity for the BOJ to do unlimited QE, and in a way that would allow them to keep stimulating the economy even as growth and inflation started moving well in their direction.

With this in mind, the Trump effect has sent U.S. yields on a tear higher. That move has served to pull global interest rates higher too--and that includes Japanese rates.

You can see in this chart, the ten-year in Japan is now positive, as of this week.

With this, the BOJ came in this week and made it known that they were a buyer of Japanese government bonds, in an unlimited amount (i.e. they are willing to buy however much necessary to push yields back down to zero).

What's happening now is the materialization of the major stimulative policy they launched in September. This has green-lighted the short yen trade/long Japanese equity trade again.

It should drive another massive devaluation of the yen and a huge run-up in Japanese stocks, which I don't think ends until it sees the all-time highs of '89--much, much higher.

Source: Forbes

[winston]

QE - Japan

The Bank of Japan's big QE launch in 2013 is a huge reason the Fed was able to end QE in the first place and start its path of normalization.

The BOJ launched in April 2013; Bernanke telegraphed "tapering" a month later.

The Fed officially ended tapering on October 29, 2014.

Stocks fell 10% into that official ending of Fed QE. On October 31, 2014 (two days later), the BOJ surprised the world with bigger, bolder QE (a QE2).

Stocks rallied.

Source: Forbes

[winston]

Markets Start to Ponder the $13 Trillion Gorilla in the Room

by Enda Curran , Liz McCormick , and Eric Lam

Fed officials discuss when to start reducing asset holdings
If global economy continues to improve ECB and BOJ may be next

Source: Bloomberg

https://www.bloomberg.com/news/articles ... n-the-room

[winston]

BAML: The '$1 trillion flow that conquers all' explains everything happening in markets

by Bob Bryan

The global markets all come down to central banks.

At least that's the argument of Michael Hartnett, the chief investment strategist for Bank of America Merrill Lynch.

In a note to clients on Thursday on what he called "the $1 trillion flow that conquers all," Hartnett observed that the amount of financial assets added to central banks' balance sheets was the "one flow that matters" in the market.

"$1 trillion of financial assets that central banks (European Central Banks & Bank of Japan) have bought year-to-date (= $3.6tn annualized = largest CB buying in past 10 years); ongoing Liquidity Supernova best explanation why global stocks & bonds both annualizing double-digit gains YTD despite Trump, Le Pen, China, macro," Hartnett wrote.

Put another way, the $1 trillion in bonds and stocks bought this year by central banks like the ECB, the BOJ, and the Swiss National Bank puts purchases on pace for $3.6 trillion in buying this year, the most dating back to the start of the global financial crisis in 2007.

Hartnett argues this big increase in central-bank balance sheets has held down bond yields and supported stock prices.

So, even with rising geopolitical uncertainty that one would think might put a dent in markets, there has been relative stability in Hartnett's eyes.

Source: Business Insider

[winston]

BAML: The '$1 trillion flow that conquers all' explains everything happening in markets

by Bob Bryan

The global markets all come down to central banks.

At least that's the argument of Michael Hartnett, the chief investment strategist for Bank of America Merrill Lynch.

In a note to clients on Thursday on what he called "the $1 trillion flow that conquers all," Hartnett observed that the amount of financial assets added to central banks' balance sheets was the "one flow that matters" in the market.

"$1 trillion of financial assets that central banks (European Central Banks & Bank of Japan) have bought year-to-date (= $3.6tn annualized = largest CB buying in past 10 years); ongoing Liquidity Supernova best explanation why global stocks & bonds both annualizing double-digit gains YTD despite Trump, Le Pen, China, macro," Hartnett wrote.

Put another way, the $1 trillion in bonds and stocks bought this year by central banks like the ECB, the BOJ, and the Swiss National Bank puts purchases on pace for $3.6 trillion in buying this year, the most dating back to the start of the global financial crisis in 2007.

Hartnett argues this big increase in central-bank balance sheets has held down bond yields and supported stock prices.

So, even with rising geopolitical uncertainty that one would think might put a dent in markets, there has been relative stability in Hartnett's eyes.

Source: Business Insider