Wednesday, September 12, 2012

Don't Be Relieved

After the Fed comes out with QE3, you will finally have all the potential bad news AND good news out of the way.  So there will be relief and concurrent with that emotion, prices that reflect it.  But the market is always looking ahead, it doesn't look back.  QE3 is almost in the rearview mirror, I don't care if its unlimited QE, because that is the base case assumption now.  Unless a lot of the Fed money into Treasuries and MBS ends up in stocks and commodities, you don't get a continual uptrend.  You may get money that is just stuck there in Treasuries and MBS taking yields even lower. 

Let's see how many positive and negative catalysts await after QE3.  Just from what I am hearing, they are ALL negative catalysts!  Not one single positive catalysts after QE3.  Q3 earnings are going to be bad.  China continues to slowdown.  Election uncertainty coming up and the fear that Obama will win again, because he's ahead in the polls.  Fiscal cliff.  Maybe the only positive catalyst that I see mentioned is if Spain asks for the bailout, but that's probably expected by most as being inevitable. 

So it's a really bad time to be relieved after we get QE3, because news-wise it is all downhill from there.

No comments: