I'm now pretty certain we'll have QE3 in September (election year, Bernake is gonna do it for Osama) and SPY breaks out higher. Gonna put my money where my mouth is on Monday.
It entirely depends on Draghi IMO. Bernanke basically said he isn't ruling anything out, that's all. I believe the simple fact that we're in a deleveraging phase by nature makes interest rate manipulation less effective, especially in lowering rates. Manipulating interest rates lower being the previous method in credit expansion based growth, I would say that wealth would be created in a deleveraging phase by increasing interest rates. Risk/reward analysis for debt obviously leans towards higher profit margined lending activities being based on higher levels of interest. Banks are over saturated with money right now, it would be more risky to take on loans at a potential lower profit margin, especially at scale. If banks have a higher potential margin of profit this also allows for a higher potential margin of error, and vice versa. Interest rates being any lower isn't going to change the dynamic of this current enviornment, coupled with the fact that individuals are saving and renting more, corporations are financing themselves with bonds at record low interest rates. Buying more Treasuries or even mortgage bonds won't change anything. Stirring water around in the same bucket won't get you a bigger bucket. Ben is going to sit tight and see how the Euro-situation plays out, if the EU can come up with solid plans, Ben will sit tight for the time being. My two cents at least.
Haha, I totally forgot about that. Europe won't be calm for long. Sept is when Europe comes back from vacation, soon it will be clear that nothing has really changed as far as the PIGS are concerned and the can has simply been kicked a bit further down the road.
My thoughts exactly. This rally is based on politics. Based on fundamentals we should be in a bear market. Hence my thinking that when the poltics are more or less over with, the tide will again go out, and we will then see who has been swimming naked, to quote Buffett.
Precisely, this is why for the sake of politics, the Fed has to ease again in September to fuel a short term rally to the run up of the election.
i swear the more i see people changing to getting long and a certain level of certainty .. i think the rally is over..
When the rally is over it will turn and a downtrend will begin. There is no need to predict the turn, in fact, the more you do, the more of the rally you miss.
Quite right. And after a 41 month Bull Market it won't turn on a dime either. It will take a while to roll over. There should be a clear topping pattern (Head & Shoulders perhaps?) which will take many weeks to develop. A lot of people have to be convinced it's over before a full scale long term Bear Market can get established.
] so your making the assumption that there hasn't been three stimulus driven bear market rallys since the 08-09 crash?