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The threat of unbridled Quantitative Easing is QE3, as much about the threat as the easing. We’ll do it for as long as it needs to be done! Almost as vague as possible. It is sometimes hard to remember that the job of QE is not to help just the stock market. It is to inject liquidity into the market. Get lenders to lend again. Considering most are sitting on a cash pile QE is possibly meant to be punitive. We will devalue your money so deploy it! Also, the vagueness means that the swings speculating can stop. Fed says we are doing QE so no more rallies on bad news, and no more declines when they are disappointed. Hopefully this vague QE will be like lithium for the market. That is the psychological effect of this announcement. At least it will shut everyone up about QE3. I was getting sick of it.
Okay that might just be fear-mongering because I do not think inflation is a pending threat. Not until the accumulated debt of the populace declines. Most people are in siege mode. Hunker down, and try to break the siege methodically. I still don’t know if QE3 is the solution to what ails the economy, but we’ll have to see. I’ve been pretty open about not thinking it’ll work, and it not happening at the last meeting. Well I was right. Notice I did not write about no QE this time. I still thought they would delay it till 1 more meeting. The announcement came as a surprise, but not a shock.
As much as the market has been waiting for QE3, I would have thought all of Wall Street would wet themselves in a simultaneous loosening of bladders. I expected to read about a flash flood in downtown Manhattan. Instead everyone has been happy, but the markets have only gently moved up. On most charts I see a spike upward then pretty flat after that. Sure there might be an upward slope here and there, but considering they were waiting for this you would think all the traders would rejoice and go long. Perhaps in the coming days.
For now, I would hold off on any buy and hold strategy. QE3 was announced at a possible peak for the market. Now it’ll bust higher, but why would you pay a higher price. You can continue holding, but buying, I am not so sure. Options are gonna be awesome now. Get a fat QE check from an asset sale and take a huge position in something it’ll rocket. So its time to pay attention to calls again. Thursday and Friday lottery plays will be where its at.
Now the question is will this really make jobs. That is what we need. I think a bump in the minimum wage nationally will do wonders for the economy. You want companies to let loose? Don’t tax them. Make them pay more. Minimum wage jobs are labor intensive. If you cut them less stuff gets done. Customer service would suffer. Companies will not shot themselves in the foot to save a buck, because saving a buck would cost them 2 bucks. It would do wonders for consumption though. I read one article about it, and I am not taking a liberal slant. I just think it is the most effective form of stimulus, and it pushes the burden onto the private sector instead of the taxpayers. Considering profits at many companies have been great, but they’ve done little to help the economy they owe us. I hate bailouts! It will raise the standard of living for many, increase economic consumption, lower debt, increase jobs by increasing money flow, etc. Lots of great benefits. Hey it worked for Henry Ford right?
That is enough off topic discussion. QE3 should be good for portfolios in the short term, however you will see a severe correction in stocks even if the economy improves. The question is whether the correction will signal a new rally, or a continuing decline or flat market. You’ll know more as I know more. Visit again.
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