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Did The Market Remove Its Own QE Punchbowl?

Posted By admin On July 30, 2012 @ 2:18 am In Money Watch | Comments Disabled

Zero Hedge [1]
July 30, 2012

There are only three words that send a chill down the spine of Ben Bernanke – Ron, Paul, and Deflation. His life’s work is devoted to the avoidance-at-all-costs of the latter (and probably the former in reality). As we discussed here two weeks ago [2], his actions in extreme monetary policy have all occurred at periods when the market’s expectations of future rapid de- or dis-inflation have increased rapidly. As we noted then: without inflation break-evens dropping, the Bernanke put will not arrive; but the market in its infinitely efficient wisdom has created a self-defeating spiral of BTFD reflexive front-running on any rapid spike down in future inflation expectations – which implicitly sparks a non-dis-inflationary reaction and removes Bernanke’s punchbowl for another day.This has occurred 4 times this year – with this week’s early plunge being caught by Draghi and Hilsenrath – and with inflation break-evens almost at their highest in 10 months, it would appear the ‘desperate-not-to-miss-the-life-giving-rally’ market just removed its own blood supply.

Did The Market Remove Its Own QE Punchbowl? 20120727 NONEWQE 0 [3]


Each time the inflation break-evens have cracked down hard towards 2.0%, Bernanke has stepped up bowl-in-hand and ladled out the yummy QE Kool-Aid; 2012 has seen 4 ‘mini-spikes’ which have all been triggers for responsive equity buying to front-run Ben’s-Bowl. But as is clear, the more this occurs, the less likely the bowl is to actually appear!

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URLs in this post:

[1] Zero Hedge: http://www.zerohedge.com/news/did-market-remove-its-own-qe-punchbowl

[2] we discussed here two weeks ago: http://www.zerohedge.com/news/bernanke-put-strike-now-1200-sp-500

[3] Image: http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2012/07-2/20120727_NONEWQE.png

[4] Market Is More Fragile Now Than Pre-Lehman: http://www.prisonplanet.com/market-is-more-fragile-now-than-pre-lehman.html

[5] MARC FABER: Obama Is A Disaster, The Stock Market Should Have Fallen 50%, And You Should Buy Yourself A Machine Gun: http://www.prisonplanet.com/marc-faber-obama-is-a-disaster-the-stock-market-should-have-fallen-50-and-you-should-buy-yourself-a-machine-gun.html

[6] Goodbye Operation Twist, Hello QE X+1: http://www.prisonplanet.com/goodbye-operation-twist-hello-qe-x1.html

[7] Gold, Silver Plunge As Fears Monetary Punchbowl Is Taken Away Spread: http://www.prisonplanet.com/gold-silver-plunge-as-fears-monetary-punchbowl-is-taken-away-spread.html

[8] In Past Week Americans Pull The Most Money From Stock Market Farce Since US Downgrade, Despite Market Surge: http://www.prisonplanet.com/in-past-week-americans-pull-the-most-money-from-stock-market-farce-since-us-downgrade-despite-market-surge.html

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