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QEII Thoughts?
Old 05-20-2011, 07:56 AM   #1
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QEII Thoughts?

Just wonder if folks think there will be major market volatility in June when quantitate easing ends? Storing up cash for opportunities or looking for safe assets? Will it be 'the end of the world as we know it' or more like Y2K, just end with a whimper?
(No one on this financial forum would think of a ocean liner with this thread?)
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Old 05-20-2011, 08:23 AM   #2
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The logical, but uninformed, side of my brain says that the market has already priced out the risk in treasury yields and mr. market ain't worried.

The illogical, and more uninformed, side of my brain is running around like a chicken with its head cut off screaming that the sky is falling and financial Armageddon is coming.

We seemed to come out of QE round 1 ok so QE round 2 may be a non-event (as in, I can still buy food, I can still travel places without worrying about armed mobs, etc). On other hand, given the S&P's talk of eventually downgrading treasuries, I'm stocking up on potatoes. Oh, and cash, but that's unrelated, I just need a beefier emergency fund.
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Old 05-20-2011, 08:27 AM   #3
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For my part I'm raising some cash and getting a little defensive. The market dropped 20% last year on the end of QE1. I don't think anyone has a good read on it, better safe than sorry.
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Old 05-20-2011, 10:00 AM   #4
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The relevant question is "what is more important to asset prices, the size of the Fed balance sheet, or the incremental purchase?" Put another way, is the stock or flow, more important? The Fed has debated this and come to the conclusion that scarcity is what impacts prices (e.g. the stock of assets it has taken out of circulation).

The 'stock' of assets will not change with the end of purchases so they believe there will be no impact. I think I agree.
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Old 05-20-2011, 10:43 AM   #5
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The latest GEAB newsletter expects it to cause major havoc: "Unable to launch a QE3 (even unofficially through its Primary Dealers as it used to do until the world became too closely interested in the US Treasury Bond market), the Fed will helplessly watch interest rates rise, US government deficit costs explode, the world dive into an intensified economic recession, stock exchange collapse and the US dollar show erratic behavior, making short-term saw-tooth movements, depending on the influence of these events, before suddenly losing 30% of its value".

But despite all the newsletters in the world, the future remains unknowable...
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Old 05-20-2011, 10:47 AM   #6
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I am getting more defensive. QEII is not my main reason, but it may trigger something. I have had a big gain in my equity funds. Record prices sounds like the bull run will be more difficult. Debt ceiling politics and 'toopid' has me locking in gains.
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Old 05-20-2011, 10:55 AM   #7
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All this hoopla over a ship taken out of service in 2008? I don't get it...
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Old 05-20-2011, 11:02 AM   #8
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Old 05-20-2011, 11:33 AM   #9
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Quote:
Originally Posted by REWahoo View Post
All this hoopla over a ship taken out of service in 2008? I don't get it...
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Old 05-20-2011, 11:42 AM   #10
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Quote:
Originally Posted by yakers View Post
Just wonder if folks think there will be major market volatility in June when quantitate easing ends? Storing up cash for opportunities or looking for safe assets? Will it be 'the end of the world as we know it' or more like Y2K, just end with a whimper?
(No one on this financial forum would think of a ocean liner with this thread?)

Well, since I heard on the radio that the earth is ending tomorrow, I do think about what is happening in June....


Now, if the earth does not end.... then I do not think anything major will happen... probably a small increase in interest rates...
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Old 05-20-2011, 04:56 PM   #11
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Who knows? I read the QE1 ended at that end of Q1 2010. The market correction began several months later.... June 2010

http://liber8.stlouisfed.org/newslet...oomEdition.pdf

Quote:
The first round of QE began in March 2009 and concluded in March 2010
I thought the summer correction was due to concerns about the PIIGS (European debt crisis) and that Employment numbers seemed to founder a little and fears that the economic recovery might stall (double dip).


I am going to stick with my strategic plan.... Rebalance to targets maybe.
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Old 05-20-2011, 05:16 PM   #12
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Just remember that POSH = Port outbound, starboard home is an urban legend. More at snopes..

I would be very surprised if rates didn't go up significantly and so I am in cash at pathetically low rates (but am not willing to go out on the yield curve).
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Old 05-20-2011, 05:31 PM   #13
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I have been taking some gains since the last Whee thread . I am cash heavy at this point so I am taking a wait & see approach.
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