STOCK MARKET WATCH - Thursday, 26 January 2012

[Ghost Dog]

105. US Market Pricing In Non-Existent QE3?

... However, the economic evidence leads to a massive disappointment to the current bulls. The first road block is politics. High asset and commodity prices will not make it politically possible for Bernanke to go through with QE3. Oil is already trading near $100 per barrel, the S&P 500 is only 2.5% away from its 52-week high, and agricultural softs such as orange juice, corn, pork, and live cattle are near all time highs. More money printing will only drive food and energy prices even higher.

Negative effects from the loss in purchasing power of Americans who do not trade commodities will outweigh any optimism generated by a higher stock market. In addition, the American public has grown more skeptical of the Federal Reserve, and QE3 will be seen as Ben Bernanke using monetary policy to buy the Obama administration votes or a tactic for the government to cheat its way out of deficit spending instead of a real fiscal policy solution.

QE3 will also not take place because of the track record of the results of the previous two rounds of quantitative easing. They may have provided support for the stock market, but have done little to improve unemployment while adding severe risks of high inflation. Unemployment actually increased 2.6% during QE1, and only declined 1% (9.5% to 8.5%) since the announcement of QE2 in August of 2010.

These numbers are not even factoring the large amounts of workers who have dropped out the labor force that skew official unemployment numbers lower. The real products of quantitative easing have been higher commodity prices, artificial support in equities markets, and civil unrest (from the Arab Spring to Occupy Wall Street) generated by declining real wages. As a result, it does not make political or economic sense to add more quantitative easing.

/... http://seekingalpha.com/article/321863-market-pricing-in-non-existent-qe3-expect-major-sell-off

Some comments to the above:

- cedarhill Comment (1)

Let me be clear (viz Obama), Bernanke-Geithner will do QE3 to shore up things timed to the election. The July date is about right since about mid-August for QE3 would be about right for a big QE3-driven rally. Thus, buy heavily at the end of July and sell off before the election. And don't get greedy.

- Nicholas Pardini Comments (234)

That sounds like good timing if there were to be a QE3. I'm just not sure if I'm cynical enough to believe that the Obama and the Fed (I'm a supporter of neither) is that openly corrupt to screw the American people through inflation to benefit a few friends and donors on Wall Street.

- joe kelly Comments (384)

The top Wall Street dogs will get what they want from either Obama or if he happens to lose in November, that guy. It's been going on since Reagan.

- untrusting investor Comments (5046)

NP,
Openly corrupt. Of course they are. Politicians, the Fed, and crony capitalists could care less about the American people. It has been all about wealth transfer for decades now. Why would that change? The balance sheet recessions is masking/offsetting inflation at the present, but at some point raging inflation will explode again. Just no way to tell when that will happen, but oil will likely be a good predictor yet again. These crooks in Washington, Wall Street, and the Fed will likely be able to continue the charade until oil prices once again force their hand.