coach d wrote:
Now that the default risk has passed, the blowoff top cometh.
But what's interesting is the change in the US Dollar Index (and to a certain extent the change in long treasuries and expectations for same). They seem to be factoring in no change to FED policy for an extended time and selling off the dollar accordingly. The FED throws more money into the economy for which they acquire paper that they will one day have to pay interest on, the spoils accrue to those that already have it, and in the long run, the little guy gets burned (again, i.e., buy high--sell low).
Sagarin:
D-E-F-L-A-T-I-O-N
Going to be a really good party until it bursts, though.
coach D, looks like our melt-up scenario is happening. A pullback here would be nice to allow the market to continue a steady zig-zag, but if we see assets bid to ridiculous levels as I acknowledged could happen a few years ago and again on this thread, then you and I are on the same page (and they could be bid higher than you think, even as we are more than ripe for a downdraft).
I wish you could get your liberal brethren like Webby, etc to see that QE hasn't really done anything with regard to money supply, the velocity of money, or economic growth. I suppose they will question the San Francisco Fed or liberal policy advisor and former favorite to head the Fed in Larry Summers as "legitimate" sources. There are plenty of economists out there that have acknowledged that $3.5 trillion+ of QE has bought us anemic marginal growth. The only thing I didn't anticipate is that the Fed would be foolish enough to implement QE-near perpetuity, but, then again, when you implement policies that slow growth and undercut the Middle Class even further, what does one expect except to be boxed into a corner?
"Conclusion:
Asset purchase programs like QE2 appear to have, at best, moderate effects on economic growth and inflation. Research suggests that the key reason these effects are limited is that bond market segmentation is small. Moreover, the magnitude of LSAP effects depends greatly on expectations for interest rate policy, but those effects are weaker and more uncertain than conventional interest rate policy. This suggests that communication about the beginning of federal funds rate increases will have stronger effects than guidance about the end of asset purchases."
http://www.frbsf.org/economic-research/publications/economic-letter/2013/august/large-scale-asset-purchase-stimulus-interest-rate/"In April, at a private gathering of investors sponsored by Drobny Global Advisors, an investment advisory group, Mr. Summers said, "there is less efficacy from quantitative easing than is supposed," according to notes of the meeting reviewed by The Wall Street Journal.
But, Mr. Summers added, "The corollary of that is that if QE won't have a large effect on demand, it will not have a large effect on inflation either. So this is not a compelling argument against QE."
- Larry Summers
As a sidenote: "Lawrence H. Summers, the former Treasury secretary and senior White House economic adviser, has withdrawn as a candidate for Federal Reserve chairman in a startling development that raises urgent questions about who will lead the central bank when Chairman Ben S. Bernanke steps down in four months.
Summers withdrew after an intense uproar among liberal Democrats, women’s groups and other advocacy organizations against his potential nomination — a highly unusual assault on the candidate who President Obama favored for the job."
What is the real reason for the uproar? Perhaps he, unlike his constituency, knows the ineptness of Fed policy.