Sunday, April 24, 2011

Rumour Mill – QE3

Bernanke Has Unilaterally Added A THIRD Fed Mandate That Guarantees QE3

"In the latest version of his newsletter, James Grant points out that the Fed has a third, unofficial mandate, and that it explains why QE3 is much more likely than people presume right now".

Posted by alan @ 08:48 PM (3198 views)
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10 thoughts on “Rumour Mill – QE3

  • Who could have guessed, QE3. The S&P along with the theives in the night will love this.

    Is that a dollar bill I see in the murky distance or just a piece of toilet paper?

    That’s another dollar bull down flashman.

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  • Equities will tank if there’s no QE3. Consider:

    CAPE (cyclically adjusted P/E) is currently @ 23.5, 43% above long-term average. And when it’s been that high or higher in the past there have been big equity downturns. See http://www.marketwatch.com/story/history-bodes-ill-for-stock-market-2011-04-12

    And banks and hedge funds have been increasing their debt loads (margin debt is at its highest since the last crash) to buy equities. Some argue that this has also decimated short community, the shock absorber that can to attenuate the downside. See
    http://pragcap.com/surging-margin-debt-and-the-instability-qe2-has-created

    This level of borrowing is encouraged by the low volatility of the S&P 500, itself the result of QE2. There’s a feedback loop: QE lowers volatility, increases banks risk appetite, increases borrowing for equity purchases, increases equity prices and that increase lowers volatility. All this can unravel quickly:
    http://seekingalpha.com/article/263289-volatility-on-a-leash-the-vix-index-and-the-end-of-qe2

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  • Second para – “decimated THE short community, the shock absorber that can attenuate the downside”.

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  • 2. icarus

    Are you saying that their blowing air into a tent with a slit in it and each time this is done the slit gets longer.

    RIP.

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  • The fact we’re on the cusp of QE3, doesn’t that suggest the policy has failed? The analogy I heard often is the use of a defibrillator on a person having a heart attack. Is it time to call it? (As they say on medical dramas) Was the original plan to have open ended QE like this? I can’t remember. Its been so long I’ve become accustomed to weird financial capers, a bit like Orwell’s permanent war, after a while everyone forgets who, how and why it started and just accepts it as the always-been-thus paradigm. How much longer can QE last? How much self-harm can America take? Is QE more like chemotherapy? There’s a chemo drug called doxorubicin IIRC, its red. Patients call it The Red Devil or Red Death it can make you feel so sh1t. Is QE The Red Death of financial cancer? Is there a theraputicaly useful dose?

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  • nothing learned from the credit crunch then…..end of…..short sellers squeezed out of the market on low volume…despite huge riskd abound…the vix shows geared institutions are not hedging their bets

    when its a one way bet the market turns

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  • fubar – there are few who gain from the financial and pharma sectors apart from the pushers.

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  • Is this (QE3) the thinking behind the silver spike today?

    …or is it the realisation we are poisoning the oceans, The police of Syria and Sudan (and a few other middle east states) running riot or Arsenal losing all chance of getting their hands on the league trophy?

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  • I’m surprised that anyone is surprised.

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  • 7. hpwatcher

    I’m not suprised that your not suprised.

    The words pulse, finger and blind spring to mind. I’ll leave Cilla out of this one.

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