Handing out money instead of candy

Like handing out candy to kids on Halloween, central banks keep handing out money to adults that continue to magically grow out of electronically generated trees. The Bank of England added another 50b pounds to its asset purchase program bringing the total to 325b pounds. As a percent of UK GDP, the BoE balance sheet is about 21% vs about 20% for the Federal Reserve and almost 30% for the ECB as a percent of the Eurozone economy (not all of EU). The ECB will add more at the end of the month with LTRO Part II and the Fed still has all guns blazing ready to go with more. It’s no coincidence as a result that the implied inflation rate in 5 yr US TIPS today is breaking out to the highest since July at 2.10% vs 1.5% last Sept. In Asia, Indonesia joined other Asian central banks and cut rates by 25 bps to 5.75%. The South Korea stayed on hold though. China’s Jan CPI unexpectedly jumped to 4.5% y/o/y from 4.1% but some are blaming the timing of the New Yr. PPI rose just .7% y/o/y. With Greece, it seems that the discussions are down to just one issue but a very large and important one, that of pension cuts and no deal looks likely today. With US markets, individual investors remain very bullish as AAII said Bulls rose to 51.6 from 43.8 while Bears fell to 20.2 from 25.1.

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