How's the 600 billion going to affect the market and inflation?

[BigNick]

In answer to the OP: I don't know, but the Dow is up 178 points and it's only lunchtime.

[dex]

Quote:

Originally Posted by novaman I'm here to eat my humble pie. Last September of 2009 when the DOW was at 9800 I became real uneasy about things and went nearly 100% cash. While I'm still uneasy about things, I'm concerned about inflation and have concluded that since no one can really predict where all of this is going to end up, the wisest thing for me to do is to hold a very diversified portfolio and just let it ride. So today I went back in with a broad mix at a 65%/35% ratio of stocks to bonds. I'll consider this a very expensive lesson learned as it has cost me several hundred thousand dollars

Did you go from cash to stocks/bonds in one day?

[73ss454]

As the market was heading down I said I would do 2 things if the market hit 7K. I would look for a PT or full time job and pull out of the market. On the day it did the market went down from just over 7K to 6600 and I missed my 7K exit point. I continued to sit and still haven't touched anything. As for the job, I got a PT job which is just about to end.

All is well that ends well, but I'm sure we aren't out of the wood yet.

So yes Nova, no one knows anything.

[Purron]

Check out Bernake's op-ed piece in today's Washington Post:

Ben S. Bernanke - What the Fed did and why: supporting the recovery and sustaining price stability

Lots of interesting comments too.

[keegs]

Quote:

Originally Posted by BigNick In answer to the OP: I don't know, but the Dow is up 178 points and it's only lunchtime.

Yeah.. ..but does it have legs?

This has been a very good exchange boys... all very good points...wish I had some more cycles to take it in better. .. I'm going to have to go over it again when I've got some down time...keep on going!

[dex]

I don't fully understand the Fed's actions but here are some of my thoughts about it: 1. put liquidity into the economy 2. try to keep or lower interest rates - keeps borrowing costs low; government debt interest low and CPI related increases low 3. devalues the US$ - higher cost for imported goods; people will buy less costly American item. Increases exports. Reduces the balance of trade deficit. Here are some of the headwinds for the Fed's actions A. Oil $87 - a major import is increasing in price during the US winter taking money out of consumer's pocket and the economy in general. B. Consumer sentiment low and fragile I think one of the reasons for the current market advance is not so much the Fed's actions but a reaction to the election. People see it as the Fed Gov't will be gridlocked so not much will change in the next 2+ years. This provides a certainty the business community has bee looking for. The future; when inflation starts up and the Fed needs to take the money out of the market it has been putting in is the real critical point.

[MichaelB]

Back to the original post. It's probably especially important to stay well diversified and not bet on a specific outcome. Some folks may see this as a good time to rebalance. My allocation has not changed - equities and munis with a fair amount of cash.

Both the world economy and population continue to grow and the developing world continues to industrialize, and that looks to continue for a while.

[LARS]

Yves at Naked Capitalism has a pretty good summary of the discussion of QE II. Worth a read for those that are trying to understand likely impact.

Bernanke Versus Pimco’s Mohamed El-Erian on QE2 « naked capitalism

[haha]

Quote:

Originally Posted by MichaelB The biggest losers are holders of debt, especially public debt. This would currently be China and Japan, followed by resource producing countries, mainly petroleum.

Michael, this seems to be a forecast, presented as a fact. Obviously debt-holders will lose, but let us not forget that the price of oil freely floats, and it now floating pertty high, even in the midst of a large slowdown in the Western economies.

It is also far from a foregone conclusion that debt-holders will "suck it up" and continue as before.

Ha

[Gone4Good]

Quote:

Originally Posted by haha Michael, this seems to be a forecast, presented as a fact.

I read it as saying that foreign holders of US Dollar denominated debt would be hurt by a devaluation.

[haha]

Quote:

Originally Posted by Gone4Good I read it as saying that foreign holders of US Dollar denominated debt would be hurt by a devaluation.

Well, I think that is a completely safe assumption.

Ha

[keegs]

Charlie Rose - Economists Joseph Stiglitz and Richard Berner

[foxfirev5]

Quote:

Originally Posted by BigNick In answer to the OP: I don't know, but the Dow is up 178 points and it's only lunchtime.

I got the big time itch around 3:45 to buy into this market. With my terrible skill at market timing I view this as a warning sign. Stick to the AA, stick to the AA, turn off the TV....

[traineeinvestor]

Quote:

Originally Posted by LARS Exactly the point. The investment question of the century is if and when this occurs... Get this correct and you will be able to coin money.

In the 18 years I have been here, there has been periodic speculation that the peg would either break or be adjusted - sometimes the popular wisdom has been that the HKD would go down and sometimes that it would go up. At one stage during the Asian crisis there were queues outside the banks for days as people lined up to convert HKD into other currencies. I'm sure it will change at some point, but guessing when has, historically, been an exercise in futility.

In any case, I would very much hope that it does not change until after I retire as I am paid in USD.

[traineeinvestor]

Quote:

Originally Posted by MichaelB The biggest losers are holders of debt, especially public debt. This would currently be China and Japan, followed by resource producing countries, mainly petroleum. Everyone in the world sees and knows this, and expects it as well. If it is orderly, most will not be particularly happy but will suck it up and learn to live with it.

It follows that if one expects the USD to continue to devaule, one should not invest in USD debt. Absent continued manipulation, a reduced demand for USD debt should logically lead to higher interest rates which reduces the market value of debt instruments (especially longer maturities) so investors will get hit twice.

[dex]

Quote:

Originally Posted by foxfirev5 I got the big time itch around 3:45 to buy into this market. With my terrible skill at market timing I view this as a warning sign. Stick to the AA, stick to the AA, turn off the TV....

You can wait a few days - the price is way outside the Bollinger Bands.

[73ss454]

Stop it Dex, you're killing me. Are you going to try and time this thing again.

[REWahoo]

Quote:

Originally Posted by dex You can wait a few days - the price is way outside the Bollinger Bands.

When was the last time those guys had a hit song?

[dex]

Quote:

Originally Posted by 73ss454 Stop it Dex, you're killing me. Are you going to try and time this thing again.

I don't short the market - well maybe a little but I think I have a cold or flu so I'm not interested.

But, if you look at charts with BB price usually doesn't stay outside BB for long.

[LARS]

That didn't take long. Central Bankers are heard on Bernanke's "beggar-thy-neighbor" policy as they consider responses:

FT.com / Global Economy - Backlash against Fed