The Feds Bazooka Misfired

by GoldMoney Insights
Gold Money

The Germans – as always – have a word for it: Rohrkrepierer. Literally translated it means “[projectile] that explodes in the barrel before it exits the weapon”. This is a perfect analogy for what happened when the Fed took out what it felt was the financial Bazooka, just to see equities implode on the close (see Exhibit 1). More specifically, the NY fed today announced a massive expansion of its repo facility by a staggering 1.5 trillion $ over 2 days. The Fed also announced it would start purchasing coupon Treasuries as part of its POMO operations.

[…] As of today, the S&P500 is down 26.7% from the peak, surpassing the -20% threshold that is usually associated with a bear market. What is staggering though, is the speed at which this happened. It took the S&P500 just 16 trading days to do so. The previous record was set by no other stock market crash than that of 1929 with 30 trading days. In other words, the current equity market crash has been twice as fast as the mother of all crashes in 1929.

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