QE-3

[eytonxav]

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Originally Posted by Cut-Throat I disagree, the average consumer (Median income is around $50K per household) does not consider tax structure when spending...They spend what's in their pockets...Their pockets have been thinning. Thanks!

And what's holding down wages and job growth. To me, the answer is uncertainty (taxes/deficit/regulations) and I'll throw in the fed as well.

[ziggy29]

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Originally Posted by DFW_M5 And what's holding down wages and job growth. To me, the answer is uncertainty (taxes/deficit/regulations) and I'll throw in the fed as well.

Avoiding specific politics here, this is what really frustrates me about how both parties in Congress are addressing this. They seem to think the other side's plan to regain budgetary sanity is damaging to the nation and the economy, but neither side seems to understand or accept that the ongoing uncertainty created by their perpetual intransigence and can-kicking might be *more* damaging to the employment picture, to consumer confidence, to investor confidence and to the nation's credit rating.

(Not looking for a political argument about who is wrong or right -- just saying that I think a refusal to meet in the middle somewhere and put *everything* on the table is really harming us.)

[eytonxav]

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Originally Posted by ziggy29 Avoiding specific politics here, this is what really frustrates me about how both parties in Congress are addressing this. They seem to think the other side's plan to regain budgetary sanity is damaging to the nation and the economy, but neither side seems to understand or accept that the ongoing uncertainty created by their perpetual intransigence and can-kicking might be *more* damaging to the employment picture, to consumer confidence, to investor confidence and to the nation's credit rating. (Not looking for a political argument about who is wrong or right -- just saying that I think a refusal to meet in the middle somewhere and put *everything* on the table is really harming us.)

Yep, its infuriating

[Bimmerbill]

So, how do we take advantage of the QE3? Refinance mortages or other consumer loans? Like someone mentioned, can mortgage rates go down further?

Borrow money cheap and invest?

[nbw888]

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Originally Posted by Bimmerbill So, how do we take advantage of the QE3? Refinance mortages or other consumer loans? Like someone mentioned, can mortgage rates go down further? Borrow money cheap and invest?

Invest in precious metals and metal miners. Bernanke basically indicated that they will do whatever it takes to keep the economy afloat. Real interest rates are negative, and will be until at least 2015. It is now RISK ON for commodities. Don't miss one of the biggest run ups (and one day the next insane bubble) in history.

[FinanceDude]

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Originally Posted by Bimmerbill So, how do we take advantage of the QE3? Refinance mortages or other consumer loans? Like someone mentioned, can mortgage rates go down further? Borrow money cheap and invest?

Refi if you can or need to. I still think real estate is depressed value-wise. Low interest rates and depressed real estate values could make for opportunity.

The Fed can print all the money they want, eventually they will have to "pay the Piper". They are kicking the can down the road like Congress is doing. I think at some point we will have inflate our way out of all this, and that will be ugly. Food and gas prices will remain high.......

[Texas Proud]

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Originally Posted by Bimmerbill So, how do we take advantage of the QE3? Refinance mortages or other consumer loans? Like someone mentioned, can mortgage rates go down further? Borrow money cheap and invest?

I hope mtg rates go down further.... I did not refi a month or two ago when they were down... my wife was out of town and I delayed... hoping it pays off...

[MichaelB]

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Originally Posted by Texas Proud I hope mtg rates go down further.... I did not refi a month or two ago when they were down... my wife was out of town and I delayed... hoping it pays off...

With the new Fed announcement it is unlikely rates are going up soon.

[ziggy29]

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Originally Posted by MichaelB With the new Fed announcement it is unlikely rates are going up soon.

One potential side-effect of this on employment: It could actually make the unemployment situation worse as some retirees who hoped they could "tread water" with terrible rates on savings for a little while may have to throw in the towel and look for a j*b until they get more than 1% on savings and CDs again.

[Fermion]

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Originally Posted by nbw888 Invest in precious metals and metal miners. Bernanke basically indicated that they will do whatever it takes to keep the economy afloat. Real interest rates are negative, and will be until at least 2015. It is now RISK ON for commodities. Don't miss one of the biggest run ups (and one day the next insane bubble) in history.

I just noticed this today. The one stock I have that is not an index fund is FCX (a copper and gold mining company). I bought it earlier this year at around $32 and today it is $43. Can you say "Thanks Ben!"

[MichaelB]

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Originally Posted by ziggy29 One potential side-effect of this on employment: It could actually make the unemployment situation worse as some retirees who hoped they could "tread water" with terrible rates on savings for a little while may have to throw in the towel and look for a j*b until they get more than 1% on savings and CDs again.

The data I've seen this year shows men >55 have the biggest growth in labor force participation.

Edit to add: new housing construction is still far below its long term average and probably the most important single driver of current unemployment. Until an additional 750k new houses are being built the economy is likely to continue to drudge along.

[teejayevans]

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Originally Posted by Bimmerbill So, how do we take advantage of the QE3? Refinance mortages or other consumer loans? Like someone mentioned, can mortgage rates go down further? Borrow money cheap and invest?

So instead of getting a mortgage at 4.5%, you will be able to get one at 4.3%, like that is going to make a difference, do they really think people are staying on the sidelines waiting for lower interest rates?? It's just a waste of money. I think they should raise rates, slowly, that would spur people to buy houses, maybe get that business loan, now. But knowing we'll just still be at same interest rates is only going to cause more people to stand on the sidelines.
TJ

[teejayevans]

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Originally Posted by Fermion I just noticed this today. The one stock I have that is not an index fund is FCX (a copper and gold mining company). I bought it earlier this year at around $32 and today it is $43. Can you say "Thanks Ben!"

Now if you sell it and spend it on some USA goods or services, Ben's plan will work...
TJ

[ziggy29]

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Originally Posted by teejayevans I think they should raise rates, slowly, that would spur people to buy houses...

Well, because most people buy homes according to the monthly payment they can afford, if rates rise, the amount of home they can buy will fall in order to maintain the same monthly payment. That could potentially send housing into another tumble, and that's a big part of what QE[1-3] have been trying to prevent, for better *and* for worse.

Though I would grant that a rise in rates could lead to a short burst of increased home buying and refinancing to "get in" before rates get a lot higher... I suspect the longer term would see any such strength gradually eroded.

In any event, Bernanke has effectively taken all urgency out of a home purchase or refinance, and all the hope out of savers and retirees hoping to stay retired with interest income.

[explanade]

Hasn't the Fed indicated that it wouldn't be taking these kinds of measures if fiscal policy was more proactive?

Every monthly jobs report this year has shown private sector job gains offset by public sector job losses. The country is operating under an austerity program, kind of like the UK (and like Greece, which had it imposed on them).

[MichaelB]

This chart from the St Louis Fed shows the impact of lower interest rates on US households Graph: Household Debt Service Payments as a Percent of Disposable Personal Income (TDSP) - FRED - St. Louis Fed

I can't reproduce it here because I can't figure out how to do that from the iPad, but the chart shows total debt servicing is back to levels of the late 80's and early 90's.

This allows for deleveraging while minimizing the negative impact on aggregate demand, and is one of the things keeping the US out of another recession.


Edit to add: Josh Brown's colorful view on QE3

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Stop reading "Nine Takeaways from the Fed's blah blah blah" articles, they are a waste of time. There is only one takeaway: The Fed wants you to feel rich. The game plan is the mother of all Wealth Effect Hail Mary passes and you're in the end zone receiving along with the rest of us.* And this time, they're not playing games.* That's the only real takeaway you need. Get Rich or Die Trying | The Reformed Broker

[Hamlet]

I haven't seen anyone mention perhaps the most important positive affect any inflation generated by this new QE--

It will speed up the de-leveraging process we are going through. Private debt to GDP peaked at about 100% at the start of the crisis. We are down to about 85% now. Consumers spent the last 20 years levering up. Inflation could make the de-leveraging a little quicker.

Our biggest problem is a lack of demand, and one of the biggest reasons for a lack of demand is that many consumers are still up to their ears in debt. Anything that can shrink that debt somewhat will have a positive affect on demand eventually.

Note that the higher oil prices have started a little energy boom in this country. That could help employment going forward.

Remember, those high food and gas prices are also someone's income. Note that gas prices are just now getting back to where they were before the crisis started, so it isn't like we're facing run-away inflation.

[CCdaCE]

The takeaway worked for me. I bought a new house.

Now, the question is whether to:

1. Pay off the mortage early (*stir the pot*) .
2. Save cash (and see inflation eat it?).
3. Invest more (but doesn't this overvalued market have to come to a screechin' halt some time?).

/end navel gazing.

-CC

[ziggy29]

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Originally Posted by CCdaCE Now, the question is whether to: 1. Pay off the mortage early (*stir the pot*) . 2. Save cash (and see inflation eat it?). 3. Invest more (but doesn't this overvalued market have to come to a screechin' halt some time?).

Pick your poison. There's simply no attractive place to put money today. Some of them may seem "less bad" than others (dividend stocks?), but none of them seem compelling given interest rates and current valuation of securities.

[explanade]

I thought the P/E overall was under 15 and was still historically low?