Big Bad Ben Bernanke seems pleased with the success of quantitative easing. While he warns that the economy is not where it needs to be and recent movers have yet to fully be realized, he is happy with the progress.
Evidence of its effectiveness is the success in bringing down long-term interest rates. By twisting the curve there is no doubt that that you can borrow money long-term at very low rates, assuming of course you find a bank that will actually lend you money? Ben said “There are some positives, but I want to be clear that while we've made some progress there is still quite a ways to go. We would like to see a stronger labor market," he said. "There are too many people whose skills and talents are being wasted."
Ben’s speech and the talk by Chicago Fed President Charles Evans seemed to suggest that indeed there will be no short-term end to quantitative easing. Mr. Evans and cold weather boosted the petroleum markets. The sector is being led by European Gas oil which is driving heating oil higher. Add to that rising hopes for more stimulus is adding to market support.
Of course while QE is still supportive, it won’t have as much impact as long as other countries continue heavy monetary accommodation and stay in balance as far as the value of their currency is concerned. In Japan the drop in the Yen after the passing of a major stimulus package has raised some concerns despite the fact that it pushed the Nikki index to the highest level since 2010. The Japanese yen bounced back from a 30 month low as the expectations that Japan was ready to do even more stimulus. Yet as Bloomberg reports Prime Minister Shinzo Abe’s fiscal and monetary stimulus measures may trigger a collapse of Japan’s economy as early as this year, according to Takeshi Fujimaki, a former adviser to billionaire investor George Soros. The yen has slumped 6% since elections last month returned power to the Liberal Democratic Party run by Abe, who’s demanded that the Bank of Japan (8301) undertake unlimited cash infusions to end deflation. The premier also unveiled 10.3 trillion yen ($116 billion) in extra spending last week, a step that will add to public debt that’s already more than double the size of the nation’s economy. “Large-scale spending is ridiculous given the amount of debt Japan has accumulated, while I think highly of Abe in regards to his intention to weaken the yen to support growth,” the president of Fujimaki Japan, an investment advising company in Tokyo, said in an interview on Jan. 11. “Abe’s policies would have worked some 10 years ago, but now they will only accelerate an economic collapse.” I guess QE is in the eye of the beholder.
Cold, cold and more cold moved us. Gas oil flying and Heating oil moving as the break on the talk of Russian tankers seemed to evaporate. Yet a very accusatory speech by President Barack Obama over the debt ceiling raised concerns in the marketplace that we were getting ready for another fiscal showdown. Overnight a weak EU industrial production number may keep us at bay but oil still looks to get towards the higher end of the range that I predicted last month.
Platinum is soaring as Anglo American announced it is shutting mines at a time when demand is already projected to outpace supply driving platinum above gold for the first time in 10 month. Dow reports Anglo American Platinum Ltd., the world's largest platinum producer said it will suspend production at several mines in South Africa Tuesday. The company, which is majority-owned by U.K.-listed miner Anglo American PLC (AAL.LN) and produces about 40% of the world's mined platinum, said the changes to its business will result in 14,000 job losses and a 20% drop in annual production, or 400,000 troy ounces.