When Will QE3 Be Announced?

[AdamA]

Anybody want in on this action?

I've got middle of October.

Sticking with 2 September.

[6 Iron]

I'm sticking to Sep 2.  It's right before a long weekend.  They love to sneak that stuff in when people aren't paying close attention.

This sounds about right, with 14 months to the next election. But in the Price is Right tradition, I will say Sept 2, and 1 second.

[MediumTex]

I'm sticking to Sep 2.  It's right before a long weekend.  They love to sneak that stuff in when people aren't paying close attention.

This sounds about right, with 14 months to the next election. But in the Price is Right tradition, I will say Sept 2, and 1 second.

You DOG!!!

[Pkg Man]

I will continue to stick by my prediction that it won't happen.  Of course after today's abysmal GDP report, my prediction looks less certain, although I still think that the Fed will sit this one out.

But feel free to remind me how lousy my predictive abilities are if I'm proven wrong.

[MediumTex]

August 2nd might come and go with no debt ceiling resolution, some panic for a few weeks whilst they rearrange debt servicing by raiding piggy-banks and the backs of sofa's, a downgrade from triple A in the interim and costing perhaps $100B in extra costs - before AAA being reinstated as a Christmas present.

A wild card is that the ratings agencies could continue making noises about downgrading U.S. debt and one day the U.S. government could designate the ratings agencies terrorist organizations and begin dropping precision guided munitions on their offices around the world.

After all, downgrading U.S. debt would have a very similar effect on the U.S. economy as a terrorist attack.

Dumber things have happened and I wouldn't be surprised if a more subtle version of the scenario above were to unfold.

[6 Iron]

I'm sticking to Sep 2.  It's right before a long weekend.  They love to sneak that stuff in when people aren't paying close attention.

This sounds about right, with 14 months to the next election. But in the Price is Right tradition, I will say Sept 2, and 1 second.

You DOG!!!

You're right, of course. Therefore, if I win, while I will not share the glory and fabulous riches that await me with Adam, I will mention him in the footnotes of my forthcoming autobiography.

[AdamA]

You're right, of course. Therefore, if I win, while I will not share the glory and fabulous riches that await me with Adam, I will mention him in the footnotes of my forthcoming autobiography.

I'm gonna hold you to that.  I love to be mentioned in footnotes.

[MediumTex]

I assume we will be hearing from Bernanke pretty soon.

[AdamA]

I assume we will be hearing from Bernanke pretty soon.

In exactly one month, on Sep 2nd.

[MediumTex]

I assume we will be hearing from Bernanke pretty soon.

In exactly one month, on Sep 2nd.

I don't know.  This bond market and gold action is pretty ominous.

Just think how sick an economy must be when you have investors fleeing to BOTH gold and long term bonds with so much enthusiasm.

It's just an intuition that I could never fully articulate, but I feel like a wild animal that is sensing bad weather approaching.

[moda0306]

It's hard for bond purchases to do much when rates are already at 0%.

Usually the next tool to stimulate the economy (whether you think that's a good thing or bad thing) is fiscal stimulus.

Who thinks we'll see much more of that any time soon?

MT,

Also, it's these simultaneous gold/bond moves that scare me about the future potential of the PP... not that I disagree with gold's move so much as I find it to be a bit of a mystery, pricing wise.  Both assets have a "fear" or "recessionary" nature to them.  If we were to see some prosperity, I wonder if the PP would really suffer with gold & treasuries simultaneously collapsing instead of rising.

[MediumTex]

Usually the next tool to stimulate the economy (whether you think that's a good thing or bad thing) is fiscal stimulus.

Who thinks we'll see much more of that any time soon?

That's a joke right?

Didn't we already do all of this back in 1937?  That was when Congress got it in their heads that what the nation really needed was a balanced budget.  I wonder who was surprised when the economy immediately went back into recession?

I wonder who will be surprised this time around?

[Pkg Man]

Usually the next tool to stimulate the economy (whether you think that's a good thing or bad thing) is fiscal stimulus.

Who thinks we'll see much more of that any time soon?

That's a joke right?

Didn't we already do all of this back in 1937?  That was when Congress got it in their heads that what the nation really needed was a balanced budget.  I wonder who was surprised when the economy immediately went back into recession?

I wonder who will be surprised this time around?

You may be right, but most of the cuts won't take place for quite some time, so it might not be a replay of '37.

While I would prefer to see MUCH lower levels of both government spending and taxation, I think that the Dems have a point that higher taxes on the "wealthy" - at least at this point in the economic cycle - would be less destructive than spending cuts.  That is why I actually preferred the deal that fell apart to the one that was ultimately agreed to. 

Either way, there may be no easy way out of the mess we're in.

[moda0306]

It's a joke in that I don't think we're going to see a new stimulus soon based on the style of debate in Washington where both are arguing for austerity, but they're fighting over taxes vs spending.

[AdamA]

It's just an intuition that I could never fully articulate, but I feel like a wild animal that is sensing bad weather approaching.

What do you think is going to happen?

[MediumTex]

It's just an intuition that I could never fully articulate, but I feel like a wild animal that is sensing bad weather approaching.

What do you think is going to happen?

Have you read Watership Down?

I feel a bit like Fiver.

From wikipedia:

The novel begins in a warren with Fiver, a young rabbit, who is considered a runt by the warren and yet is also a seer, receiving a frightening vision of his warren's imminent destruction. He and his brother Hazel, the main character of the novel who at this point is low in the rabbit hierarchy, attempt to persuade their chief rabbit of the danger facing them, but are ignored because of Fiver's inability to accurately describe this danger. They then set out on their own with a small band of rabbits to search for a new home, though with difficulty, as the warren's military caste—the Owsla—try to prevent them leaving.

The traveling group of rabbits find themselves following the leadership of Hazel, a role reversal because of his previous position as an unimportant member of the warren. They travel through dangerous territory with Bigwig and Silver (both former Owsla) and Buckthorn as the only significantly strong rabbits among them.

The company copes with many dangers and meets a rabbit called Cowslip, who invites the group back to be members of his warren. Here, the company encounter an apparently prosperous rabbit colony with ample food and protection from predators by a human whose farm is near their warren. However, Fiver is profoundly suspicious, especially when he observes that these rabbits do not tell the customary tales of El-ahrairah but instead recite fatalistic poetry. When Fiver attempts to leave, Bigwig learns firsthand the deadly secret of the warren: the whole area is a human-designed rabbit farm with numerous snares placed to harvest them. After helping Bigwig escape from a snare, Fiver exposes his fellows to the warren's horrific secret, effectively convincing them to flee this honey trap of a colony immediately. One of the rabbits in Cowslip's warren, named Strawberry, joins them at this point.

Fiver's visions promise a safe place in which to settle, and the group eventually finds Watership Down, an ideal location to set up their new warren. They are soon reunited with Captain Holly and Bluebell, also from the original warren, who reveal that Fiver's vision was true and the entire warren was destroyed by humans.

Something along those lines.

[AdamA]

Have you read Watership Down?

No,  but I definitely will.  Sounds great.

[Liz L.]

Tex, what are you doing in your variable portfolio as a result of your Fiver sense tingling?

I ask because I have the same sense, but don't know what, if anything to do about it.

Also, of course, I could be wrong.

[MediumTex]

Tex, what are you doing in your variable portfolio as a result of your Fiver sense tingling?

I ask because I have the same sense, but don't know what, if anything to do about it.

Also, of course, I could be wrong.

Nothing right now.

I can see a period of dollar strengthening being the next thing to happen.

But who knows?

[Reub]

Clive, are there any indications that this stock market decline is going to continue into a major downslide or is this just a typical 10% correction that we are overdue for?

[MediumTex]

Clive, are there any indications that this stock market decline is going to continue into a major downslide or is this just a typical 10% correction that we are overdue for?

I will believe that it will continue until Bernanke announces QE3.

[stone]

Can anyone explain for me why QE bolsters stocks? I can see that it has done in practice but I don't understand why. Is the idea that QE (the Fed swapping assets for bank reserves) makes all other assets rise in price until the expected future returns are as low as for the bank reserves? BUT now expected future returns for stocks are probably already as low as for bank reserves and yet we all seem to "know" that if QE3 was to start tommorow in earnest, stocks would rise.

[MediumTex]

Can anyone explain for me why QE bolsters stocks? I can see that it has done in practice but I don't understand why. Is the idea that QE (the Fed swapping assets for bank reserves) makes all other assets rise in price until the expected future returns are as low as for the bank reserves? BUT now expected future returns for stocks are probably already as low as for bank reserves and yet we all seem to "know" that if QE3 was to start tommorow in earnest, stocks would rise.

No one really knows what exactly the Fed is buying.  That makes people scared to short anything while the Fed is in the market.

QE is clearly not about lowering interest rates to stimulate borrowing, because thus far interest rates have FALLEN after each round of QE has ended.

[stone]

Are you saying that people suspect that the Fed might buy stocks???

[MediumTex]

Are you saying that people suspect that the Fed might buy stocks???

More likely stock derivatives.

I don't understand the mechanics of all of this very well, but judging by effects people are a lot more hesitant to short stocks when the Fed is engaging in QE, which tells me that one way or another QE is, in part, designed to manipulate stock prices.

I think Bernanke even said in one of his speeches last year that causing the stock market to move up was one of the goals of QE, since the wealth effect created by stock market optimism would be good for the whole economy.