Tuesday, November 2, 2010

Market is Clearly Pricing in a Huge QE2

Interesting start to the morning trading.

The market appears to be expecting a huge QE2 stimulus announcement tomorrow.

The dollar is selling off as it begins pricing in more easing:

At the same time bonds are up sharply since the start of trading.  Take a look at the 10 year:

Gold and silver are both up on the falling dollar news.  Stocks are also up as the lower dollar/higher equities correlation continues to hold.

The big money is clearly expecting something huge tomorrow from the Fed.  Based on the early trade I would guess they are predicting at least $1 trillion in QE stimulus over the next year.

The consensus is the Fed will announce $600 billion over the next 6 months BUT they will also announce that they will keep the door open to continuing the program.

How any of this is good for our nation is beyond me.  Strong economies are not built on weaker currencies.  QE2 will continue to keep prices artificially high at a time in which the average wage in this country is falling.  How is this good for America?

It's great for the bankers of course as they get another $1 trillion to blow bubbles with.  However, at the same time, it's going to force even more people to start eating out of garbage cans because they will no longer be able to afford to live.

I just hope that karma still exists in this world.  Recently, I have questioned my faith in such a thing, and too be honest I have begun to lose faith in this country.

Let's hope some real leaders are voted into office tonight that will look after WE THE PEOPLE instead of greedy bankers.

In the meantime watch the markets:  If the QE2 comes in lighter than expected then the market is setup for a nasty sell off.  If the pigmen get what they want(and from the looks of it today they will) stocks could march higher as the gamblers blow more bubbles with $1 trillion of fresh cash from their friends at the Fed.

Folks. let us never forget:  Greed is wrong and eventually it catches up with you:


Anonymous said...

they will prob try to avoid the 't' word and stick with a number we the sheeple are already acclimated with.. like, say, oh..

700 billion. no sweat.

of course that will really be another 5 trillion. see, it doesnt really matter WHAT the fed says, they gonna do what they gonna do anyway...

devalue the dollar.

Anonymous said...

"Strong economies are not built on weaker currencies."

Wrong, look at China.

Jeff said...

Anon 2

Look at Japan? How did that cheaper currency work out?

We have no export economy anymore. We sent all of those jobs over to China.

Let's see what China looks like economically when the west stops buying their garbage as the consumer evaporates.

ManHands said...

Jeff - didnt Japan go through a serious bout of deflation? If so, I would assume their currency was execptionally strong.

If the one end of the spectrum is Zimbabwe where hyperinflation means the currency is trashed and it takes stacks and stacks of bills to buy anything, it stands to reason that the Japanese currency is among the strongest, no?

Jeff said...


Japan did go through deflation but constant easing crushed their currency and turned it into a carry trade.

Recently the Yen has rallied which fundementally makes no sense given their deficits.

However there are so many moving parts to the currency markets.

You have the US trying to cheapen their currency and China has always manipulated their currency lower.

I think China is involved in the Yen appreciation. I have read they are diversifying and buying more japanese debt.

In a classic deflationary collapse yes the currency of the country that suffers from it should strengthen.

Japan doesn't mind a cheaper currency because they are an export economy thus their goods are more attractive.

What also makes Japan different is their debt is mainly held internally versus foreigners.

I think if Japan sinks back into a severe recession(which should happen given the rising cost of their exports) the Yen should take another tumble.

The overall issue with all of this is everyone is trying to cheapen their currencies which is distorting the FX markets.

Anonymous said...

The race to weaken currencies is clearly a symptom of international corporate interests; and their evident usurpment of governments.

the only fluctuation is which specific corporate inflence has a greater interest in a weak currency.

the USA will win that race... but that could change as their overseas interests grow and the necessity of the american people and their dollars wanes.

Jeff said...


Couldn't agree more.

Going to be interesting to watch.