We are closer to QE4 than rate rise: Tea leaves say

Monday’s post on price manipulation in the gold market using futures contracts to settle in cash — set a record for views on the site. I thank all my readers for taking the time.

So this week sees dueling Federal Reserve governors coming out with rate rise statements. Tuesday, Gov. Lockhart from Atlanta said he could see Sept. as a launching point.

On Wednesday, former Carlyle Group exec — now Fed governor Jay Powell sees liquidity problems in the corp. bond markets on a rate rise. While the economy is “strong” he says, there is dislocation in high yield corp. paper. So Powell said Wed. morning he was not so sure Sept. was right time to raise rates.

And accordingly stocks were whipsawed on the comments.

Readers here know I have said since January that there will be no rate rise this year. In fact we could be a year away, given we are entering a deflationary recession.

At this point we are more likely to see QE4 in a smaller version — let’s say $65 billion a month, than a rate rise.

The $65 billion would look like an improvement over the $85 billion/month of QE3, but remember the Fed is still rolling over mature notes back into the market from its previous interventions, so it would equate to about $100 billion a month when all the liquidity is factored in.

This is your economic recovery, no salary raises, no interest on savings, but put  a little something in the stock market, we’ll throw you a bone.

 

 

 

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