The first rule of fight club investing is don’t fight with the central banks.

Globally central bank policies have certainly transformed markets and placed a floor under all pull backs over the past few years. First the ECB pledge’s to buy up 3 year bonds (unlimited purchasing) of countries that will obey the laws and conditions imposed by the EFSF/ESM, and then the Fed announces QE3 which in effect extends is policy until mid 2015 from 2014 and agrees to buy US$ 40 bn per month for an unlimited period of time until the US unemployment declines substantially. (Although 40 bn per month, means 480 bil a year, which is less than QE2 US$600 bn…but they did say it could “unlimited”). And then the Japanese central bank announces it will expand its asset purchase and loan program by 10 trillion yen (US$126 bn) to 80 trn yen. And now today the Chinese central bank announces injection of 365bn yuan into the Chinese banking system.

Four major centrals bank announcing massive measures in the month of September. What has the impact been of all this? It’s kept equity markets up, bond yields down, and surprised a lot of market participants (including us) that thought the month of September would be its usual awful self.

Never fight with central banks