The Central Bank intervention fiasco continues
to unravel before our eyes.
Globally all Central Banks have kept an eye on
the Bank of Japan, which announced the single largest QE program
relative to its GDP in history. That one single QE program announced
in April 2013 is equal to over 20% of Japan’s GDP.
Japan
experienced two brief quarters of improved economic activity, before
things turned south again. Turns out that printing trillions of
dollars to buy bondsdoesn’t create
growth.
The latest example is Sony, the Japanese
electronics giant which just announced a 70% COLLAPSE in its profit
outlook. Sony’s CEO had stated previously that a weak Yen, caused
by the Bank of Japan’s QE program was actually a “disadvantage.”
We now have concrete proof as Sony’s profits
outlook evaporates.
This is the death knell of QE. We now know for
a fact that the Fed and other Central Banks are aware that QE doesn’t
create jobs nor does it improve the broader economy.
All that leaves is stocks… which have
benefitted enormously from QE, with the S&P 500 rising to new
record highs boosted by the Fed’s money printing.
However,
ultimately stocks react to profits. And as Sony has proven,
QE hurtsrather
than helps profits. Indeed, Sony’s stock is down over
1.5% on the earnings outlook drop. And it’s essentially breakeven
since the Bank of Japan announced its massive QE program.
To continue reading today’s article…
Phoenix Capital Research
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