Dark Suspicions over Draghi’s New QE

Jon Alternative Media, Civil Unrest, Economy, Fiscal Policies, Market Commentary

A Changing World
LAUSANNE, Switzerland – European Central Bank chief Mario Draghi set off a riot on Thursday. Investors rushed the stock market, like looters hoping to score a new TV set. By the end of the day, the Dow was up 320 points, or nearly 2%.
It was actually a case of selective looting as this comparison between the DJIA and the Russell 2000 (RUT) shows. While a handful of big cap stocks the performance of which is decisive for the price-weighted DJIA (e.g. high-priced MCD) or the cap-weighted COMPX and NDX (GOOGL, AMZN et al.) soared, the broad mass of small capitalization stocks essentially did nothing. The ratio between the RUT and SPX is in a steep downtrend and made a new low for the move at the end of last week. It’s a rally of the generals only – click to enlarge.
The proximate cause of this hullabaloo was Draghi’s hint that the ECB may go back into the market with more QE. That and a good report from Mickey D’s was enough to erase the last of this autumn’s losses. But why would Draghi be ready to expand euro QE?
Maybe he’s been looking at sales figures for the yellow machines. Caterpillar tells us that not only have sales been falling every month for the last three years, but also that its losses are becoming more widespread. In September, not one of its reporting regions saw an increase. Either CAT is a terribly mismanaged company (unlikely)… or something else is going on.

This post was published at Acting-Man on October 26, 2015.