Sitting here day after day watching the indexes push and grind through technical level after technical level makes me wonder what could happen after QE2 if there is no QE3+. I certainly haven't had the guts to call any tops... especially when the FED's have admitted they want to push the markets higher for psychological reasons to please the mass public. Oh well.... sheeple will be sheeple
I'm not sure the FED is simply "pushing" the market higher to make people feel better. The FED is not directly purchasing equities they are buying debt. QE1 was about buying company debt and helping fund business through a rough patch. This gave lower rates and helped company profitability. One of the measures they set for the success of that program was rising stock prices. Healthier companies have revenue and earnings growth and as a result higher stock prices. QE2 is all about making the growth self sustaining. Treasuries have crowded out other debt markets and the FED is trying to push money out of safe havens (T bonds) and into the riskier assets that really get the economy moving. The FED isn't just printing money. It is just eliminating the middleman in funding the economy. We are still using markets to set prices and determine money flows. The FED is just stepping in as the "lender of last resort". When the 2 Trillion in business capital sitting on the sidelines comes back into the market the FED can reduce its balance sheet. However, in a crisis situation, why should the FED increase money supply indirectly through banks who may not use it to fund the economy? It is much easier to purchase the assets directly and eliminate the possibility of it sitting on the sidelines. The total GDP equation is made up of C, I, G and NX. In previous recessions we only knew how to increase the G portion of this equation. This was with mixed results. Because of the failure of this strategy in Japan we have taken a different route. Through QE1 we increased I and through QE2 we are keeping G from crowding out other variables. In addition to these moves there are also policy adjustments that can be made to fix the imbalances of the NX section. Already we are starting to see some export growth. Hopefully this is a comprehensive strategy that can help to turn things around. But in the end, we are all just guessing.
finally a fresh topic to discuss, and a fresh perspective to boot. With all the people on hear carrying on about QE2, it kinda makes you wonder who the 'sheeple' are
Dont be an idiot and get on the bull train and make money. You need to be agnostic and not let politics get in the way of making money. Right now its easy money, take advantage of this easy profits period. I mean even a caveman can do it.
Definitely have been on the bull train. Still holding positions bought from last spring. Free money indeed!
Paul Ryan / Bernanke discussion first highlight of my day. Wow... I need to get out more! It's funny, but when I was loading up on my portfolios last spring... It seemed there were constant market top calls then too!