US Stocks on a Record Melt Up on Yellenomics and ECB’s QE!

US stocks are on a “Wile E Coyote running off the cliff” momentum.

Here is media’s narrative of last night's record setting run by US stocks. From Bloomberg

U.S. stocks rose, sending benchmark indexes to records, as Macy’s Inc. led a rally among retailers and investors speculated the Federal Reserve’s Janet Yellen will continue the central bank’s stimulus policy as chairman….

The melt up frenzy mode in US stock markets has been broad based. All four major benchmarks from the S&P 500, Dow Jones, Nasdaq and the Russell 2000 have performed strongly.

And here is what has spurred the fantastic run… (bold mine)

Yellen, nominated to be the next chairman of the Fed, said the economy and labor market are performing “far short of their potential” and must improve before the central bank can begin reducing monetary stimulus

“A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases,” Yellen, the Fed’s current vice chairman, said in testimony prepared for her nomination hearing tomorrow before the Senate Banking Committee. “I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy.”

The remarks show Yellen is committed to the central bank’s strategy of attempting to boost the economy and lower 7.3 percent unemployment, more than four years after the economy began to recover from the longest and deepest recession since the Great Depression.

Today’s stock market guidance: Bad news is good news. Bad news means more policies to implicitly redirect or to transfer resources from the real economy to the stock markets. Therefore, US stocks have nowhere to go but up

And it’s not just about Yellonomics. The European Central Bank hinted that Europe’s version of QE may be on the way,  from Reuters:

European Central Bank Executive Board member Peter Praet on Wednesday raised the prospect of the central bank starting to buy assets to bring inflation closer to its target, one of the central bank's most divisive tools.

He also suggested that the ECB could still create negative deposit rates, essentially charging banks to place their money with it.

Zero bound rates, QE, negative deposit rates: central bankers want to eviscerate everyone’s savings in the name of “growth”.

But obviously ballooning central bank balance sheets have hardly translated to “growth”, even the statistical ones. 

"Far short of their potential" has been the dynamic since 2008. It never ends. It seems like endlessly "Waiting for Godot"

The other reason central bankers are supposedly conducting even more easing has been to “combat deflation”.

Bizarrely, by selectively focusing on the CPI index, the mainstream ignores the frenetic stock market melt up yet declares “deflation”. It is as if stock markets operate on different dimensions from the real world.

Such equivocations has been media's du jour feature.

Today’s headlines from the Guardian on Spain’s supposed deflation “Deflation fears stalk eurozone as Spain reports fall in prices” is a good example 

Spain became the latest European country to report sliding prices, underlining fears that with inflation already at 0.7% across the 17 country single currency area in October, sky-high unemployment and a prolonged economic malaise may be dragging the eurozone towards a Japanese-style deflationary slump.

Madrid said prices in the crisis-hit country declined by 0.1% in the year to October, adding Spain to a list of countries – including Ireland, Greece and Cyprus – that are already mired in deflation.

The above is Spain’s stock market benchmark the Madrid General Index. Deflation in stocks?

Falling yields from Spain’s 10 year bonds means a rally in Spain’s bonds. Deflation on bonds?

So while it may be half true where CPI indices for crisis affected countries may have been in a decline, whatever loss in CPI has been offset by rallying financial markets.

Again such phenomena have been indicative of an ongoing shift of resources from main street to the banks, the financial industry, to the government and to relative fewer market participants occurring throughout the world, but mostly led by the US.

Yet the widespread engagement by media of doublespeak to justify these central bank interventions.

Ironically there has even recently been an “inflation” spike in the search for the term “deflation” in Google trends! Deflation, where?

Novelist George Orwell Power warned of such manipulation of information or "doublespeak" in his prescient classic 1984  

Power is in tearing human minds to pieces and putting them together again in new shapes of your own choosing.