European Central Bank

Now that the Bank of Japan has joined other central banks such as Denmark, Sweden, the ECB, and Switzerland into pushing its rates into what until just two years ago was considered the monetary twilight zone below the zero bound, and in the process sending a record $5.5 trillion in government bond yields negative...

... which quickly puts into in context all the recent warnings about physical cash being eliminated (because as a reminder negative rates and cash simply can not coexist as the latter provides a ready immunity from the former), such as the following:

As we noted earlier, in a paradoxical U-turn, one which caught everyone by surprise as a result of Kuroda's own promise just one week ago not to engage in NIRP...

... and two months after the ECB's December 3 disappointing announcement led to a historic surge in the EUR, today countless macro hedge funds have been left reeling with huge losses once again, as many had recently turned bullish on the Yen...

... only to be eviscerated by the BOJ's negative rates announcement.

There is just one phrase to explain the market's reaction to last night's BOJ announcement that it would join the ECB, Sweden, Denmark, and Switzerland into negative territory: stunned shock.

As the WSJ writes, "many investors had anticipated an expansion of the bank’s asset-purchasing program this year, but few expected Japan to join the European Central Bank and central banks of Sweden, Denmark and Switzerland in negative territory on Friday."

In what is the first official warning to a central bank to no longer do what has been done so far for seven years, earlier today Deutsche Bank came out with a startling presentation addressed to Mario Draghi, warning him explicitly that any more QE will not only not help stocks (and certainly not DB stock which continues to plumb post-crisis lows on fears it is overexposed to the commodity crunch and potentially such names as Glencore and various other commodity traders), but will actually push equities lower.

In retrospect it appears Tom DeMark was spot on with his Wednesday prediction, made just as the Dow Jones was down some 500 points that that very day was "an interim low" to be followed by a 5-8% rebound (at which point the selling would resume). In fact, those trading Japanese stocks saw virtually the entire predicted rebound take place in just one day as the Nikkei soared by almost 6% overnight, or nearly 1000 points, the biggest jump in 4 months, while risk everywhere else around the globe has likewise exploded higher, as crude has stormed back over $31/barrel.