continued QE

[xxjs]

I suppose there will be no tapering revealed on Wednesday, at best a change from the current treasury and mortgage bond buying to something else. He likes to surprise the market.

If I were interested in shares these days, I would buy on any downturn on tuesday, sell on wednesday, but I am currently not, too risky.

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[Kazu]

I'd do this as well, if it wasn't for the fact that "Bernanke days" have a terrible record with regard to stock performance, at least this year.

[Qoheleth]

If you think the market is going to move dramatically, but don't know in which direction, isn't that what options are for?

[Kazu]

If you think the market is going to move dramatically, but don't know in which direction, isn't that what options are for?

But, they might cancel each other out or some shit. Plus, options are expensive as fuck right now. I'm already fairly well positioned for a move in either direction, have a fair amount of gold (which continued QE would benefit), been holding this XIV since like 2012 (which QE would benefit) but am short the actual index (Russel 2000).

[CMMPro]

He can't reduce QE, the idea is laughable.

He can talk about it in order to boost confidence, but that's all he has.
If he actually does reduce QE, all bets are off...the economy will fail again and this time there will be no mechanisms available for him to prop it up.

[xavier]

Buy `VIX`, its supposed to match volatility. It's a product traded on CBOE. I believe it's an ETF.

https://www.interactivebrokers.com/webinars/Trading_VIX_Futures_Options.pdf

I agree with the comments, they are kinda screwed. If they actually go ahead and taper QE, we're going to see some real turbulence in the markets. Turbulence at best, crisis at worst.

Already, there is some turbulence in the markets (it has kind of been going on since April/May of this year), it seems only likely to get worse in the coming few months. I think buying the vix could be a great trade right now.

I believe in the case of continued turbulence, the fed may actually end up withholding tapering.

If they do taper, I think there is going to be a crisis of some sort (probably from the East), and they may well be forced to step in with QE4.

However, I personally believe the likelihood of any tapering in the next months is really pretty slim.

[Qoheleth]

He can't reduce QE, the idea is laughable.

He can talk about it in order to boost confidence, but that's all he has.
If he actually does reduce QE, all bets are off...the economy will fail again and this time there will be no mechanisms available for him to prop it up.

Don't get me wrong - I also think the Federal Reserve has sort of painted itself into a corner with QE. But the way you talk about "the economy will fail again as soon as it's reduced" makes me wonder. In your opinion, what would actually make the economy healthy again, rather than just "propped up"?

Buy `VIX`, its supposed to match volatility. It's a product traded on CBOE. I believe it's an ETF.

https://www.interactivebrokers.com/webinars/Trading_VIX_Futures_Options.pdf

I agree with the comments, they are kinda screwed. If they actually go ahead and taper QE, we're going to see some real turbulence in the markets. Turbulence at best, crisis at worst.

Already, there is some turbulence in the markets (it has kind of been going on since April/May of this year), it seems only likely to get worse in the coming few months. I think buying the vix could be a great trade right now.

I'd rather not try to guess when the next crisis will hit - I'd rather wait until things look bad and then short, banking on the usual VIX pattern of long periods low with brief spikes. Of course, that bears an implicit assumption that the crisis will eventually end, but historical evidence so far is positive on that front.

[NewLiberty]

Arguably keeping QE the same IS tapering it.  After all, it is not increasing along with inflation so as a percentage of the economy it is tapering!  
(if congress ran the fed.)

[CMMPro]

Don't get me wrong - I also think the Federal Reserve has sort of painted itself into a corner with QE. But the way you talk about "the economy will fail again as soon as it's reduced" makes me wonder. In your opinion, what would actually make the economy healthy again, rather than just "propped up"?

What would 'fix' the economy?

Having a lot less govt debt....getting a large volume of people back to work at productive jobs, buying houses they can afford, buying cars they can afford...living financially sustainable lives once again with low debt and high level of savings.

A stock market that isn't overblown and on the verge of a meltdown.

The real problem is that we have a huge population that is out of work and broke, and another tiny population that is barely hanging in there, and a third 0.01% population that is getting so rich off the backs of the previous two that it isn't funny.  

We also have a manufacturing sector with zero fiduciary responsibility to their employee's or local communities, enslaving the populations of even weaker economies in order to sell to anyone left that can afford it more cheap crap we don't need. CFO's that will destroy a local economy for the sake of 'their responsibility to the shareholders'...when they don't realize the people who's jobs they just eliminated were the shareholders.  

There is also a looming problem of a young and upcoming generation that is refusing to participate in the debt culture that was created by all the previous generations. They can't get anything but service based jobs, paid so low they can't buy anything so they are just saying fuckit....I'm not buying into your bullshit American debt based dream.

I could fill a children's book with what I think is wrong with the economy and it wouldn't matter...there is nothing left to do but watch it burn to the ground and start over again.

No one could fix this economy, it was doomed to fail when it began. Just as it did several times in the past few centuries.

[xxjs]

He can't reduce QE, the idea is laughable.

He can talk about it in order to boost confidence, but that's all he has.
If he actually does reduce QE, all bets are off...the economy will fail again and this time there will be no mechanisms available for him to prop it up.

exactly. The tapering talk is to appease folks that question the QE-infinity on geounds of logic, but it is not meant to ever be used.

[afbitcoins]

Don't get me wrong - I also think the Federal Reserve has sort of painted itself into a corner with QE. But the way you talk about "the economy will fail again as soon as it's reduced" makes me wonder. In your opinion, what would actually make the economy healthy again, rather than just "propped up"?

What would 'fix' the economy?

Having a lot less govt debt....getting a large volume of people back to work at productive jobs, buying houses they can afford, buying cars they can afford...living financially sustainable lives once again with low debt and high level of savings.

A stock market that isn't overblown and on the verge of a meltdown.

The real problem is that we have a huge population that is out of work and broke, and another tiny population that is barely hanging in there, and a third 0.01% population that is getting so rich off the backs of the previous two that it isn't funny.  

We also have a manufacturing sector with zero fiduciary responsibility to their employee's or local communities, enslaving the populations of even weaker economies in order to sell to anyone left that can afford it more cheap crap we don't need. CFO's that will destroy a local economy for the sake of 'their responsibility to the shareholders'...when they don't realize the people who's jobs they just eliminated were the shareholders.  

There is also a looming problem of a young and upcoming generation that is refusing to participate in the debt culture that was created by all the previous generations. They can't get anything but service based jobs, paid so low they can't buy anything so they are just saying fuckit....I'm not buying into your bullshit American debt based dream.

I could fill a children's book with what I think is wrong with the economy and it wouldn't matter...there is nothing left to do but watch it burn to the ground and start over again.

No one could fix this economy, it was doomed to fail when it began. Just as it did several times in the past few centuries.

Totally agree. It can't be fixed, its a rigged system, doing what it was designed to do which is make the rich richer for as long as they can get away with it. Once collapses we have a chance to build a good economy using free markets and sound money like bitcoins and precious metals.

[NewLiberty]

Are you kidding?

The 'collapse' is part of the system. Because it is built on a Martingale betting strategy. As long as you can keep doubling down it doesn't matter how many bad bets you make. Only, there is a limit to how big the bets can get. Once you reach that limit you burn down the casino and invite everyone over to this bigger and better casino you have ready and waiting. The game continues, and only those who can keep doubling down are guaranteed to win as long as that is the system. To work, it requires exponential growth—forever. As long as that is possible, that is the game.

Even in a regime of catabolic decline the game can continue after a manner. Except, instead of the whole pie getting bigger all the time it is the holdings of a few players that get bigger, at pari mutuel expense. There is a class war all right. But it is not the rich against the poor—it is the rich against the slightly less rich.

The bigger better is where...  IMF SDRs?

If bitcoin is ready by the time of the next Casino BBQ, that would be good for people everywhere.

[Adrian-x]

What did you say? A bigger, better casino?

Keeping with the casino metaphor, as I think I understand it.

Why would Bitcoin not be a paradigm shift. The new casino users new finite chips controlled by a p2p network not the new casino.

[Adrian-x]

It is not a paradigm shift in the sense of any kind of equitable distribution of wealth.

The paradigm shift is in how Bitcoin distributes risk.

Think of fiat as a premine with no limit. The ultimate advantage lies with the issuer, and it can be fractionalized to the extent necessary to keep their Martingale running. But only in a continually expanding economy. The risk is in being unable to increase the size of the bets in a contracting economy. It does not necessarily mean you will lose, but you are no longer guaranteed to win. At this point it actually matters if you are 'right' on your bets or not, you actually have to do a good job of managing risks. This becomes a Nash Equilibrium though because if you don't win then nobody wins. The casino gets burned to the ground and you start over. Same advantages, same old game.

Bitcoin forces the situation that risks have to be managed correctly in order to win. Nobody gets to arbitrarily finance an unlimited line of credit. It presents the same problem that a contracting economy does for the fiat systems but you don't get to burn down the casino—you just lose. But this doesn't mean that people can't run Martingales, there is just a limit to the amount that can be bet. And those making the largest bets take on the most risk, very unlike the reality of Capitalist market economics today, where gains can be made private while losses are made public.

And, you can still build an even bigger and better 'Bticoin' like system. But it will have to compete, for users, for resources. And you don't get to unilaterally arrange to burn down the old casino anymore.

Looking at it from a Macroeconomic perspective what you describe is a whole new paradigm, to me the results emphasised in bold.

On a Microeconomic level, the risks in deciding on the allocation of limited resources are easier to calculate, leaving the global Martingale investors with limited ability to mitigate there risk, I'd imagine it wouldn't even be a consideration, because you would ultimately fail.

The new winners here are the ones who erode the existing pillars of wealth by earning and saving.  That's a huge difference from what we have today, I'd consider that the equivalent of a new kind of opportunity for equitable wealth distribution.     

[NewLiberty]

Well, it eventually moves weath distribution from a Nash Equilibrium to a Pareto Efficiency, because Bitcoin does not advantage someone simply for having great wealth. Bitcoin advantages those who can do a good job of managing risk. And in that game, buy-and-hold, and DCA are hard to beat.

If it were only a Nash Equilibrium and Pareto Efficiency wouldn't it also be a Prisoners Dilemma due to Metcalfe's law?  (Without a growing population of users from inter-economic activity in the new currency it gains no value.)

[NewLiberty]

Well, it eventually moves weath distribution from a Nash Equilibrium to a Pareto Efficiency, because Bitcoin does not advantage someone simply for having great wealth. Bitcoin advantages those who can do a good job of managing risk. And in that game, buy-and-hold, and DCA are hard to beat.

If it were only a Nash Equilibrium and Pareto Efficiency wouldn't it also be a Prisoners Dilemma due to Metcalfe's law?  (Without a growing population of users from inter-economic activity in the new currency it gains no value.)

But there is a growing population of users. ... There is no unitary preference for an outcome that would guarantee the positive feedbacks of a Prisoners Dilemma.  

Except if all are buy-and-hold.
...
I think we agree about most all of this and that I am probably just being picky.