Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
AMD Ryzen Zen 3 NO UK MSRP Stock - 5600x, 5800x, 5900x 5950x Selling at DOUBLE FAKE MSRP Prices - 29th Nov 20
Stock Market Short-term Decision Time - 29th Nov 20
Look at These 2 Big Warning Signs for the U.S. Economy - 29th Nov 20
Dow Stock Market Short-term and Long-term Trend Analysis - 28th Nov 20
How To Spot The End Of An Excess Market Trend Phase – Part II - 28th Nov 20
BLOCKCHAIN INVESTMENT PRIMER - 28th Nov 20
The Gold Stocks Correction is Maturing - 28th Nov 20
Biden and Yellen Pushed Gold Price Down to $1,800 - 28th Nov 20
Sheffield Christmas Lights 2020 - Peace Gardens vs 2019 and 2018 - 28th Nov 20
MUST WATCH Before You Waste Money on Buying A New PC Computer System - 27th Nov 20
Gold: Insurance for Prudent Investors, Precious Metals Reduce Risk & Preserve Wealth - 27th Nov 20
How To Spot The End Of An Excess Market Trend Phase - 27th Nov 20
Snow Falling Effect Christmas Lights Outdoor Projector Amazon Review - 27th Nov 20
4 Reasons Why You Shouldn't Put off Your Roof Repairs - 27th Nov 20
Further Clues Reveal Gold’s Weakness - 26th Nov 20
Fun Things to Do this Christmas - 26th Nov 20
Industries that Require Secure Messaging Apps - 26th Nov 20
Dow Stock Market Trend Analysis - 25th Nov 20
Amazon Black Friday Dell 32 Inch S3220DGF VA Curved Screen Gaming Monitor Bargain Deal! - 25th Nov 20
Biden the Silver Bull - 25th Nov 20
Inflation Warning to the Fed: Be Careful What You Wish For - 25th Nov 20
Financial Stocks Sector ETF Shows Unique Island Setup – What Next? - 25th Nov 20
Herd Immunity or Herd Insolvency: Which Will Affect Gold More? - 25th Nov 20
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Bernanke Makes a Pact with the Devil

Stock-Markets / Quantitative Easing Oct 31, 2010 - 01:28 PM GMT

By: Uncommon_Wisdom

Stock-Markets

Best Financial Markets Analysis ArticleMonty Agarwal writes: When Fed President Hoenig declared last week that Bernanke is making “a pact with the devil,” he wasn’t kidding.

Nor was he talking about a little side deal that would someday be forgiven in money heaven.


Rather, he was referring to an unprecedented decision by Bernanke and Company — coming THIS week — that could change the course of history: A new round of Fed money printing with immediate impacts on markets and unforeseeable consequences for the dollar.

Meanwhile, just 48 hours from now, we will also be smack in the middle of another major event — the most important midterm election of our lifetime.

Each of these events represents potentially revolutionary changes for our country, our economy and YOUR money.

Each is going happen THIS week!

Look. Five weeks ago, when we first presented the findings of our internal Weiss poll, we already had a pretty good feel for these revolutionary changes on the way.

Then, three weeks ago, when we shared with you the results of our national Weiss-Zogby poll, we had an even clearer vision.

And now, as the hours tick by, and the events are nearly upon us, it’s time to bring you up to date …

Revolutionary Change #1 Shift to Fiscal Conservatism

We’ve known that, regardless of which party gained control of the House or the Senate, there would be a major shift toward fiscal conservatism in Congress, making it almost impossible for Washington to pass major new spending or stimulus legislation.

Our polls showed us that, in a hypothetical three-way race, a maverick, anti-spending outsider would beat both a Republican and Democratic opponents hands down.

Moreover, voters were opposed to bank bailouts by an overwhelming margin of 12 to one.

And now, within about 48 hours, those voters are going to make themselves heard!

Likely impact: As we have stressed repeatedly, this shift to conservatism is fundamentally NEGATIVE for the U.S. economy and the U.S. stock market. Both have relied heavily on government stimulus for support.

But it could be also be temporarily negative for gold, foreign currencies, commodities and other alternative investments that have been so popular lately.

Revolutionary Change #2 MORE Mass Money Printing

This revolution started months ago. And now it’s about to resume!

Indeed, we have strongly suspected all along that the Federal Open Market Committee (FOMC) was getting ready to announce a second major new round of mass money printing, or “quantitative easing” (QE2).

The problem:

Yes, the Fed CAN print the money and inject it into the system. But it CANNOT control where that money goes. So if lenders and investors have concerns about the U.S. or see more promising opportunities elsewhere, most of that money is diverted to other, alternative markets.

This is why it’s a pact with the devil. And this is why it’s bound to backfire.

Likely impact: QE2 is fundamentally neutral — or, at best, only mildly and temporarily positive — for the U.S. economy. But it is strongly POSITIVE for a wide range of alternative investments, including precious metals, key foreign currencies and certain commodities.

Key Short-Term Factors That Are Now More Evident Than Just Days Ago

As we stand at the precipice of the week in which these revolutionary changes are going to strike, several short-term factors have also come into clearer focus:

First, regarding the election, the market is now more vividly aware of the likely shift toward fiscal conservatism that we first alerted you to weeks ago. More national polls have been released. These polls have added more weight and confidence to the results of our own polls. And based on all the new poll data, analysts from all three sides — Democrat, Republican and Tea Party — are now in agreement that …

(a) The House will almost definitely be controlled by Republicans.

(b) The Republican side of the aisle will almost definitely include a strong and vocal Tea Party caucus. And …

(c) Even if Democrats retain a slim majority in the Senate, they will most probably heed the will of the majority of their constituents and oppose major spending or stimulus legislation.

In short, the market now knows what we knew weeks ago!

Second, regarding the Fed decision, the market has also zeroed in more closely on the range of likely possibilities, as follows:

(a) Based on the Fed’s own pronouncements, it’s now widely expected that the FOMC WILL announce QE2 on November 3rd. If there is no QE2 announcement, a lot of people are going to be VERY surprised.

(b) The likely QUANTITY is still being hotly debated, but my surveys and research tell me the market is expecting somewhere between $50 and $100 billion in Fed bond purchases per month.

Likely impact: The low end of the range could be a disappointment; the high end will be greeted as a pleasant surprise.

(c) More important than the quantity, however, could be the specificity of the announcement. In other words, will the FOMC specify ahead of time the total amount of QE2? Or will it be vague and keep the market guessing as to how long the money printing will continue?

Likely impact: A vague announcement will be a disappointment. A more specific pre-announcement will be greeted positively.

That’s the market’s perception of the near-term outlook. Now let me give you mine:

It’s the bulls who have been in the catbird seat in recent weeks. It’s the bulls who’ve been riding this wave and leveraging the expectations for QE2.

So right now, the burden is on THEM to get confirmation regarding their expectations for QE2. To stay on track, the bulls now NEED the Fed to pre-announce a very substantial QE2. If they get what they need, gold, currencies and commodities should be off to the races again. But if the number is on the low end, or if the Fed’s announcement is vague, we could see intermediate corrections in many of these markets.

Bottom line: The long-term fundamental outlook is very clear to us. The short-term outlook is potentially tricky and volatile, and, accordingly, I want to ensure that you have the facts you need to protect yourself and profit.

Regards,

Monty Agarwal

This investment news is brought to you by Uncommon Wisdom. Uncommon Wisdom is a free daily investment newsletter from Weiss Research analysts offering the latest investing news and financial insights for the stock market, precious metals, natural resources, Asian and South American markets. From time to time, the authors of Uncommon Wisdom also cover other topics they feel can contribute to making you healthy, wealthy and wise. To view archives or subscribe, visit http://www.uncommonwisdomdaily.com.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules