Overnight markets were higher, led by Japan, which gained 3.5%. The Reserve Bank of Australia joined the worldwide easy money party last night, as it dropped rates by 25 basis points. Also yesterday, Mario Draghi made some bold claims about what the ECB may be up to when he stated during a speech in Rome: "For the southern countries, a euro above 1.30 would be too high for their economy. Among major central banks, the ECB has been the only bank that is not expanding its balance sheet, but it will likely consider such a step." Assuming he makes good on his promise, we will have unanimous and massive fiscal and monetary stimulus from every single G-7 country and, by extension, others as well.
Green With Envy
The amount of stimulus being applied is literally unfathomable. Thus far, the U.S. is perceived to be in the best position (i.e., the sweetest of the sweet spots), with Japan quickly catching up. It would seem that world governments are in the process of concluding that their stimulative policies solve all problems and have no negative consequences (thus we are going to see more of them). How long the deflationists can hold out with their bond bets remains to be seen, but only the bond market can stop these policies -- a point I have made many times. (I should also be clear that it does not look like that will occur any time soon.) With the Dow and S&P hitting new all-time highs as we run trillion-dollar deficits, we are the financial/economic envy of the G-7 world, even with our massive problems, so you can be sure the Europeans are going to emulate us and Japan.
As for our stock market, it once again powered higher, gaining about 0.5%, though the Nasdaq went nowhere.
Away from stocks, green paper was a winner today, the bond market was flattish, as was oil, and the precious metals, which were unable to get going on the Australian rate cut were then sold, losing about 2% before rallying some. By day's end silver was essentially unchanged, while gold declined 1%.
Money Printing Is Still Wall Street's Favorite PED
So far the pattern in gold and the miners is mimicking what occurred in 2008. Obviously, no two periods are exactly alike, but we will know soon enough if that "analog" will hold. Meanwhile, the setup when comparing short interest (plus put buyers) and sentiment in the gold complex versus central bank action is perhaps the greatest I have seen in my investment career. It is like 1982 on steroids!
