What do you think? Bullish or Bearish?

So as we've all seen, the markets have been a little more volatile the past few weeks due to fears that The Fed is going to ease up with purchasing bonds. How much longer do you really think this is going to go on for? A few months? Less? Once The Fed pulls the plug are we going to be able to handle it or is it going to show that we still need more pampering?

Personally, I think once they do there is going to be some panic but overall, I'd say we can sustain. That is until we get ourselves into another mess.

Let me know what you think!

Regards

 

Anyone who thinks that Bernanke will land his helicopter anytime soon simply hasn't been paying attention. Bernanke's plan is crystal clear: continue to pump liquidity into asset markets, keep it there, and hope to stimulate the wealth affect while simultaneously stabilizing expectations. Unfortunately for him, he has inflated a bond bubble which will explode if and when there is actual economic growth (when yields rise). There is no way for him to withdraw the liquidity he has injected into the system. He knows this and the market knows this.

My prediction is that he will continue with the perpetual QE until it's someone else's problem. That is, he will hope for the best until someone else replaces him and that person will ultimately have to assume responsibility for the disaster that he and Greenspan created.

“Elections are a futures market for stolen property”
 
Esuric:

Anyone who thinks that Bernanke will land his helicopter anytime soon simply hasn't been paying attention. Bernanke's plan is crystal clear: continue to pump liquidity into asset markets, keep it there, and hope to stimulate the wealth affect while simultaneously stabilizing expectations. Unfortunately for him, he has inflated a bond bubble which will explode if and when there is actual economic growth (when yields rise). There is no way for him to withdraw the liquidity he has injected into the system. He knows this and the market knows this.

My prediction is that he will continue with the perpetual QE until it's someone else's problem. That is, he will hope for the best until someone else replaces him and that person will ultimately have to assume responsibility for the disaster that he and Greenspan created.

I've heard this for years. Luckily, my portfolio was equity-heavy and I didn't follow Paulson & Co. to the shitter.

No reason to think things will change anytime soon, given sluggish growth, persisting unemployment and lack of velocity (as you mentioned in another post).

 
xqtrack:

Right now inflation is under the fed's target, and unemployment is above it

The fact that inflation, right now, is below the target is absolutely irrelevant. Inflation is low because growth is slow and because velocity has not yet recovered (a condition that cannot exist in perpetuity). The key, and any basic monetary economics textbook would tell you this, is inflationary expectations.

xqtrack:

I think as long as he doesn't withdraw early I'm still bullish.

lol, you clearly don't know much about Bernanke.

xqtrack:

the only reason to taper are idiots who don't understand how monetary policy and economics work...unfortunately, there are a lot of them around

Please, tell me what typically happens when a central bank quadruples the supply of base money? What do the laws of economics predict about this sort of monetary policy?

[EDIT]

To answer OP's original question: short term to medium term I'm bullish on equities, long term, not so much.

“Elections are a futures market for stolen property”
 
Best Response
Esuric:
xqtrack:

Right now inflation is under the fed's target, and unemployment is above it

The fact that inflation, right now, is below the target is absolutely irrelevant. Inflation is low because growth is slow and because velocity has not yet recovered (a condition that cannot exist in perpetuity). The key, and any basic monetary economics textbook would tell you this, is inflationary expectations.

xqtrack:

I think as long as he doesn't withdraw early I'm still bullish.

lol, you clearly don't know much about Bernanke.

xqtrack:

the only reason to taper are idiots who don't understand how monetary policy and economics work...unfortunately, there are a lot of them around

Please, tell me what typically happens when a central bank quadruples the supply of base money? What do the laws of economics predict about this sort of monetary policy?

[EDIT]

To answer OP's original question: short term to medium term I'm bullish on equities, long term, not so much.

I'm pretty confident in my understanding of economic theory. I'm sure you are too. Either way, you keep planning for the hyperinflationary apocalypse and buying gold, I'll keep buying equities, let's check back in a few years and let me know how it worked out for you.

 

TIPS is predicting that shit is not looking good in the next couple of years, so I think the velocity will stay the same for a while. Once economy start recovering I think it will be some interesting times. Velocity should go up, which will shoot the inflation through the roof lol, so equity prices should go down. I think one of the problems is that people don't know wtf the Fed is going to do in the future which is probably hurting the economy. Then again what hell do i know lol

 
xqtrack:

I'm pretty confident in my understanding of economic theory. I'm sure you are too. Either way, you keep planning for the hyperinflationary apocalypse and buying gold, I'll keep buying equities, let's check back in a few years and let me know how it worked out for you.

I mean I specifically said that I would stay in equities and in bonds, at least for the short-to-medium term. I'm just saying that it would be stupid to ignore certain key macroeconomic factors that will undoubtedly alter this situation at some point in the future. Interest rates cannot stay at this artificially depressed level forever. They just can't, and every investor should think about what will happen when they begin to rise (for example, can Bernanke engage in open market sales when interest rates are rising, and would this actually drain the system of excess reserves?).

“Elections are a futures market for stolen property”
 

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