QE3 and Me

We have had two porkulus plans and we have tried QE1 & QE2 and unemployment is still over 9%. As a nation we are still more broke than the 10 Commandments, but there is still a shot, that we may yet again, try and central plan our way out of another situation.

Double dip talk is all the rage again and in between catnaps recently, Larry Summers said there is a one in three chance of another recession. Remember though, The Bernanke said we weren’t in a recession a while back, even though the unemployment line started in his hallway.

JP Morgan was out today calling for unemployment to stay above 9% “at least” through the end of 2012. So will there be another quanttaive easing? Reuters reports:

If push comes to shove, the Fed would likely look to cement its promise of keeping in place a loose monetary policy for a long period. It might even consider shifting the composition of its Treasury note holdings toward longer maturities, an option Bernanke has raised as a way to give the economy some relief.

I think my thirty year mortgage should get bumped to a fifty year mortgage too Ben.

The question is how will the market will react on this go round if it happens? We all know it’s just another band aid on cancer, but will the greedy trading masses look the other way (they always do) and just buy stocks like the performance chasing hooligans that they are? For the record, I too am a hooligan.

Algorithms don’t know or care if it’s QE1,2,3 or 50, they just buy and sell and will follow the march. The S&P is now in the hole for the first six months of the year and the hedgies are pissed. Visions of the third home in Aspen and paying off the second mortgage in the Hamptons is slowly fading to black. A ballistic back half of 2011 will cure all that and may even put them in position for the fourth Ponderosa in Belize. It’s all about performance and T-Bills doesn’t get them there.

How do you trade this? I always said cash is a strategy and there is no rush here. Charts are breaking and broken and need time to repair. I think we rally hard, but frankly I will probably want to  short the rally depending on the magnitude, but that opinion can also change when the time comes.

Is this time different?  We will know in December.



Previous Post
The Wrap 8/3/11
Next Post
What Just Happened?

Recent Articles