WASHINGTON – Just in the nick of time Monday morning, as the Dow Jones Industrial Average prepared to crash some 1,000 points at the opening bell, the Federal Reserve dramatically stepped into the fray. In its boldest move yet, the Fed unleashed the Mother of All QEs (i.e., more Quantitative Easing) just as America’s economic ship seemed about to sink. The market’s crash trajectory instantly reversed.
Here’s Tim McPartland’s initial take on the Fed’s aggressive move.
“Just 30 minutes ago the Fed announced quantitative easing of giant magnitude, buying muni bonds, commercial real estate mortgages and certain investment grade corporate bonds. The Fed took off any limits to the amount they may buy–ramp up those printing presses!!!”
Hooray for our team! The Mother of All QEs! Who knew Jerome Powell had the nerve to pull this off?
More details on the Mother of all QEs
The Twin Tylers over at ZeroHedge have more. (Bold text below by ZH.)
“… at 8am on Monday, just as we expected – given the political cover they have been provided – The Fed unveiled an unprecedented expansion to its mandate, announcing open-ended QE which also gave it the mandate to buy corporates bonds (in the primary and secondary market) to unclog the frozen corporate bond market as we just one step away from a full Fed nationalization of the market (only Fed stock purchases remain now).
“Additionally, in addition to Treasuries, The Fed will buy Agency Commercial MBS all in unlimited size.”
Enter Nancy, Chucky, and barrels of pork
Alas, as newshounds in the audience already know, Nancy Pelosi and Chucky Schumer decided to derail the third, and perhaps most important bill in the 3-bill legislative program cobbled together by Congress and the White House to counter the massive economic effects caused by the coronavirus epidemic. The legislation, in toto, attempts to provide massive relief to businesses and individual Americans across the country.
Part 3 for the most part aimed to help John Q. Public directly. But at the last minute – sabotaged in part by the coronavirus epidemic itself – Part 3 succumbed to the never-ending quest first by Pelosi, Schumer and the Democrats to lard up the bill with expensive, pork-laden goodies for their supporters. It’s an old political trick, and the Democrats play it well.
In this case, however, they are literally screwing small businesses, the average US citizen, and, of course, the stock market, by refusing to pass critical legislation unless they get their heaping helping of pork. This is dangerous stuff. Every day counts for the little guy. But Pelosi and Schumer simply don’t care. Investors do.
Debate continues, and GOP loses members to self-quarantine
This supposedly agreed upon coronavirus relief legislation was scheduled to pass a procedural vote Sunday night in the Senate. But Schumer refused to support the cloture motion to end debate, supported, of course, in lockstep by the Senate’s Democrat minority.
But making matters worse for the GOP Sunday night and continuing today, their numbers were suddenly weakened. Senator Rand Paul and at least one other senator exposed to the coronavirus tested positive. They promptly left the Senate floor to begin the currently standard 14-day self-quarantine for individuals in this situation. The Stupid Party never gets a break.
Of course, even if the entire GOP contingent were present on the Senate floor, they still didn’t have enough votes – 60 – to close off debate on the final bill. But the diminishing Republican numbers were a psychological blow to the GOP on this key issue nonetheless. Who knows what additional mischief the Democrats will pull while Senate Majority Leader Mitch McConnell remains short of party members?
As it did in 2008, the stock market needs for Congress to get serious. Now.
So, as we approach the noon hour Monday, the Fed’s recent good work, including that Mother of All QEs, has already been forgotten. Investors and high-speed trading machines took advantage of the situation – and the lack of the old uptick rule – to bang the market back down again. Hard.
As this article is being written, the Dow is off roughly 960 points for a nearly 5% loss on the day thus far. The S&P 500 is nearly as bad.
But evidently the Dems don’t care. Schumer is vaguely promising a vote on the final bill within 24 hours according to several sources. But of course, a “vote” doesn’t mean a positive vote to pass the remaining rescue legislation. The Dems will need to get their pork first.
Investors should vote every one of these clowns out in Election 2020.
But I digress.
Updates coming today as needed
As I sit here in front of my computer watching my portfolios get hosed – again – like millions of other American savers and investors, I’ll keep on top of this economic theater of the absurd today. The Mother of All QEs is far more important than today’s barrage of selling might indicate. But investors clearly want to see that 3rdpiece of coronavirus relief legislation passed. NOW.
Should Congress finally decide to do what it’s paid to do today, I’ll be back with more updates on this crucial situation.