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QT/QE lesson from Druck and what& #39;s really important with tomorrow& #39;s FOMC statement
Today& #39;s thread is about QE/QT and the non-intuitive market response to the Fed buying/selling bonds.
I have long argued that QE was BOND BEARISH - not bullish
1/ of 8
Today& #39;s thread is about QE/QT and the non-intuitive market response to the Fed buying/selling bonds.
I have long argued that QE was BOND BEARISH - not bullish
1/ of 8
Now, I know most everyone thinks the opposite. The Fed buying bonds through QE? That must mean bonds are headed higher - after all there is all that extra demand out there. Even the Federal Reserve tells you in their research their buying lowered yield on bonds.
2/ of 8
2/ of 8
Now, before you click to another tweet, let me play you a video of another "dumb money manager" who happens to feel the same way as me (make sure you have volume on):
3/ of 8
3/ of 8
Druckenmiller: "QE buying bonds would be bearish for bonds."
His colleagues: "what is wrong with you?"
Well, let& #39;s "go to the tapes" and see how Druck& #39;s prediction turned out.
4/ of 8
His colleagues: "what is wrong with you?"
Well, let& #39;s "go to the tapes" and see how Druck& #39;s prediction turned out.
4/ of 8
Druck: "my theory was that QE - buying of the bonds by the gov& #39;t would cause risk to go up and decrease the demand for bonds from other entities.
Then the day we stopped QE, bonds went up, stocks went down.
I HAVE FOLLOWED THIS FOR 8 YEARS, AND IT WAS SEVEN FOR SEVEN."
5/ of 8
Then the day we stopped QE, bonds went up, stocks went down.
I HAVE FOLLOWED THIS FOR 8 YEARS, AND IT WAS SEVEN FOR SEVEN."
5/ of 8
Druck: "I started worrying that QT was going to hit financial assets.
It& #39;s a very interesting environment to be doing Quantitative Tightening."
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It& #39;s a very interesting environment to be doing Quantitative Tightening."
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