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Well it was a blast with both barrels last Friday as the Fed unleashed a massive QE with aggressive verbiage to boot.  Two questions…was it a good thing? Will it work?

The markets were astonished and that’s what they needed to keep rally mode in place as much of the recent market activity already seemed to have priced in a QE, but not to the extent introduced by the Fed…..and astonishing it was.  Things that quickly come to mind include such issues as:

Was the economy really that weak that this massively aggressive stance was necessary?  The Market Doctor team thinks so; however the media spinning would not have had you believe it all year.

Was Bernanke preparing for a farewell move in case Romney wins the election? Could be.

Does it really help solve the problems leading to unemployment? No

The above points are just a few issues to jumble in your head and here’s some of the danger to consider.  Yes, the plan is to try to lower mortgages rates even more with purchases of mortgage back securities, however Treasury Yields shot higher in the face of the news, and this could prove to be a major neutralizer of the mortgage back effect to lower mortgage rates.  But don’t forget a more subtle and tricky maneuver by the fed with their jawboning regarding keeping rates near zero until 2015. Why mention this? …to devalue the Greenback and provide an export stimulus to the economy….very sneaky, ugh?

Does the Doc like any of this?  Absolutely not.  It is another attempt of pushing $$ into risky assets and also penalizes prudent savers of US$ by mitigating any interest income for yet another few years.  These are just some concerns, but the list goes on and on.

Over the last few days it seems like the whole world is bulled up on stocks.  Well, it seems like that’s the only trade...BUT THE RISK IS NOW BECOMING MASSIVE IN THIS SECTOR !!


Stephan Kudyba (MBA, PhD)                      THE MARKET DOCTOR


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