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Clues To Watch For The End Of QE "Infinity"

beebee
edited May 2013 in Off-Topic
"The stock market has rallied sharply in direct correlation to the expansion of the Fed's balance sheet yet economic growth has floundered much to the dismay of the Federal Reserve."

So how does the Fed pull away the punch bowl?

"The problem with the financial markets today is the speed at which things occur. High frequency trading, algorithmic programs, program trading combined with market participant's "herd mentality" is not influenced by actions but rather by perception.

As stated above, with margin debt at historically high levels when the "herd" begins to turn it will not be a slow and methodical process but rather a stampede with little regard to valuation or fundamental measures. As prices decline it will trigger margin calls which will induce more indiscriminate selling. The vicious cycle will repeat until margin levels are cleared and selling is exhausted."

clues-to-watch-for-the-end-of-qe-infinity

Comments

  • Old_JoeOld_Joe
    Pretty good analysis. Could be a good time to not be greedy and start taking some of the more recent gains?
  • clacy
    For much of the last 4 years, the investor sentiment has been very bearish. Of course, the market is designed to make the "majority" wrong and has skyrocketed during that time.

    Now it seems that sentiment has shifted towards something like.... "See, everything is alright. Bernanke was right all along, and the Fed will make sure stocks keep going up".

    That scares me a bit.
  • jerry
    Everyone always thinks they can get out in time but I think that's a bigger problem for the pros who trade in large lots.I do not expect that the day or week the fed announces their plans to stop or reduce QE that we will have an oct 87 type crash.Yes it would be nice to sell early but you give up a lot too.I think people like those on this site can manage to get out within 10-15% of the top and maybe that's ok.My plan is to go to cash in my 401k (no tax consequences ) and hope to stick it out in my taxable accounts.
    I have been wrong before and know anything like perfection is impossible. My major goal is to be able to sleep nights without kicking myself for unfortunate (and possibly wrongheaded decisions)
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