Friday, June 10, 2011

QE3 support Tested

We have seen the Dow's support tested just below 12k three times this Friday, and this is the number we should look for.  Three times and the support line is official.  This is short term however, and support could break and go lower.  Look for a bounce and then 12k, or just below, to be tested on three separate days during the next few weeks before QE3 is announced.

The bears, however astute they are, want the world to fall apart before QE3 is announced, but they forget that it is not a numbers game Bernanke is playing, but rather his policy.  He needs the recovery to stay on track, and the data suggests that it needs additional support.  Besides, he needs to monetize the debt, for if he does not, then rates rise.  He can not afford for rates to rise.

The President's Working Group on Financial Markets have access to the most liquid book known to finance.  They have access to the Treasurie's holding, as well as the Federal Reserve's.  Support is needed at Dow 12k to keep pensions returning 7%, and since this is the only thing returning interest above inflation on the markets, besides precious metals and other commodities that do not define monie as PMs do, there is great need to keep equity up.  The dollar and all fiat will be continued to be sacrificed at the alter so to keep the fiat ponzi rolling.

Equity will trade in this range until QE3, and then because it will be truth that governments are insolvent and have no choice but to rely on fiat issuance, money will run to corporate debt and equity.  The first move will be to go after the government collateral, and that is gold.  Then oil will be sought, and then the other corporate collateral will fall in line.  By Fall, the house of cards will be undone, and the scramble for real assets will be established.  It will start this month, with QE3.


  1. Mr Hendrix, could you please explain in slightly more detail what is meant by the statement "the first move will be to go after the government collateral, and that is gold"? I apologize for appearing dense, but the choice of words "go after" has left me puzzled. Also, do you mean to say that QE3, in whatever form it takes, will make an appearance before July? That is a bold prediction, if that is what is meant, and I am curious how another round of QE can appear so quickly, given the political hostility to the notion of money printing by another name. Thank you in advance for any response you may offer.

    Interesting blog you have here. I have just recently discovered it in a link from tfmetalsreport.

  2. QE3 Aint coming that fast buddy.

  3. Wait for the August heat and the sweet smell of Jacksonhole manure...

  4. QE3 won't come until most commodities have retraced a substantial part of their gains. That is the point when the the masses will accept the argument that more QE is needed to save the economy.

  5. Marcus, as precious metals lead all markets, the closer we get to QE3, which is right around the corner, the more they will be bought up. The will be bought because they can be used as collateral for loans, and in this economic environment nothing is more important than a reserve.

    The main reason Bernanke needs to monetize the debt is to keep the rates down. If the rates go up, the interest on the debt instantly bankrupts the US. They would rather pillage the public pension for a couple more weeks and then refund the pensions with monetized bond purchases. As for the debt ceiling, if they keep taking the pension funds, and then replace them with QE money, they can wait to raise the ceiling for another month.

    Prof, oil production has peaked; less supply means a higher price, because demand is staying strong. If oil trades higher, then all commodities trade higher.

    Once again, Bernanke is not playing a numbers game when it comes to QE; he is playing his policy. The recovery needs to stay on track, and to get the funding for his fiat ponzi he needs to sell his bonds at a high price. Helicopter Ben will continue with his policy, because he knows no other.

  6. On the subject of oil, Mr Hendrix, I have noticed that Brent Crude is substantially above West Texas Intermediate. Also, heating oil is closing in on its all time highs while gasoline remains stubbornly high (only WTI is lagging). This is a curious development and I wonder if you have any thoughts regarding this odd arrangement. Thank you once again for any reply you may make.

  7. It is interesting indeed. The North Sea has peaked production, and Texas oil is rising in production, and this may be a factor, but still, there has to be another reason. Can it be the PWG is shorting WTI? Is it the silver short, considering silver and oil trade 1:1 (which means the silver short has more to do with the dollar than the Euro)? Can it be that the maestro is using the dollar, as weak as it is, to keep a stable price so as to not crush demand? Marcus, you have a great question, and I do not have an answer.