Friday, February 24, 2012

Stocks and Gasoline Love Quantitative Easing

Here at  r=1.00 Group we believe...

A couple charts from Eric Parnell posted to Seeking Alpha:

click to enlarge

...Gasoline prices have followed a predictable trend since the first days of Fed stimulus. During QE1, gasoline prices skyrocketed by +118%. Once QE1 ended in April 2010, gasoline prices immediately dropped by -27% in a matter of months, and this occurred during what is typically the strong summer driving season. Once QE2 was delivered to the market in August 2010, gasoline prices jumped another 92% by the end of this stimulus program in June 2011. Once again, the moment QE2 ended, gasoline prices retreated another -28% in a matter of months. Finally, since the latest Fed stimulus program along with the European Central Bank's own LTRO program, we've seen gasoline prices skyrocket another +30%. What is even more irksome is that much of this rise in gasoline prices has occurred during a time when gasoline consumption has been falling. Have the laws of supply and demand been repealed? No, they've just been severely distorted by policy action....MORE

Mandatory correlation ≠ causation disclaimer,