What are your odds? Ever since the FOMC announcement shooting down QE3 for the moment, the markets have been hit hard with bad news after bad news. Europe is rearing its' head again. Unemployment was weak. Reports season has been weak. Today was a massacre. DJIA 12,715.93 Down 213.66(-1.65%) S&P 500 1,358.59 Down 23.61 (-1.71%) FTSE 100 5,595.55 Down 128.12(-2.24%) DAX:IND 6,606.43 Down 168.83 (-2.49%) Of course, the stock market is a sunspot variable that matters little in real economic variables. but it shows once again the illusion that the real problems out there have not been solved yet, despite whatever liquidity-boosted stock indices indicate. There has been progress made, but perhaps it is not enough. We may have to live with the fact that the banks and the cluster**** they caused may have permanently altered the growth path and the natural rate of output in America. From the FOMC... The votes were as follows--- One hawk, many doves on the general stance of accommodating monetary policy---but--- http://blogs.ft.com/gavyndavies/2012/04/03/why-the-fed-has-taken-qe3-off-the-agenda/ Jibes well with the disappointing 120,000 jobs figure. Given all that, any bets on the possibility of QE3, and all that brings (both good and bad)?
Probably depends more on Spain than anything else. Barring another meltdown in Europe, I think the economy is self-sustaining at least for the short term and probably not in need of a QE3. If Spain melts down, that changes the dynamic dramatically.
Really! I thought this was some D&D mistake, meant for Hangout and a discussion of the British Empire's ocean liner fleet. I'm sad that it isn't.
My odds? The odds that the Federal Reserve buys my assets at their future 1, 2, 5, 10 or 30-year value (principal + capital gains + dividends)? Umm, zero.
I sure as hell hope there isn't a QE3. The last thing we need is another round of swapping treasuries for cash, encouraging people to chase yield in other assets and artificially propping up stocks/commodities/junk bonds...again. Besides, do banks really need any more reserves? They've nearly tripled in the past couple years. You can't encourage lending without demand. It's like a supermarket thinking they'll sell more apples by simply cramming more of them into the shelves.
In case a hidden iceberg (ex: counter-party risk on the partial default of European nations) submerges the credit creation that has been happening, or the recovery goes off-trend, which recent numbers have indicated somewhat. Or at least, that's what the inflation doves will say. It is informative at this point to note that the FOMC is probably the most dovish it has been for quite some while. They might be hawkish somewhat when it comes to QE3, but that can change quickly given their general stances. (love the Bernanke caption, haha)