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Did Bernanke Bluff the Markets About QE3?

Stock-Markets / Financial Markets 2012 Oct 15, 2012 - 12:45 PM GMT

By: Graham_Summers

Stock-Markets

The markets roared from June to September, ever Fed mouthpiece Jon Hilsenrath of the WSJ penned an article calling for more QE in June. Fast-forward to mid-September and the Fed did indeed announce QE3, a plan that will see the Fed monetize $40 billion worth of Mortgage Backed Securities in addition to its plans to Twist $45 billion worth of Treasuries per month: a total monetization scheme of $85 billion.


However, since that time, the Fed’s balance sheet has increased just $3 billion.

Now, it takes several weeks for MBS transactions to settle, so the Fed will announce its MBS purchases since QE 3 started today at 2PM. But if that number is lower than $37 billion (how much the Fed should have bought in the last four weeks) then the Fed lied about QE 3.

In addition to this development, I want to draw your attention to the fact that the Fed balance sheet is DOWN $50 billion year over year. This confirms that the Fed has in fact been engaging in mostly verbal intervention over the last year rather than actual monetary intervention.

The implications of this are of major import.

For one thing, it indicates that the market rally on hopes of more Fed juice is in fact based on a myth. The primary driver of all stock moves has been based on hopes of more liquidity from the Fed and other Central Banks. But the Fed’s balance sheet indicates that this hope is not based on fact. That does not bode well for the bulls.

A second implication concerns the multi-trillion Dollar question: whether the Fed has in fact used up its gunpowder with all of its monetary schemes. After all, the market is roughly break-even since the Fed announced QE 3. Could it be that the market is no longer reacting to Fed action?

If that is the case, then the Bernanke put is over.

These are items to be watching for. We’ll find out the details of the Fed’s actions in an hour or so. But the tide may in fact be turning regarding the success of the Fed’s actions in pushing stocks higher.

Those investors looking for actionable investment ideas could also consider our Private Wealth Advisory newsletter: a bi-weekly detailed investment advisory service that distills the most important geopolitical, economic, and financial developments in the markets into concise investment strategies for individual investors.

To learn more about Private Wealth Advisory and how it can help you navigate the markets successfully…

Click Here Now!!!

Graham Summers

Chief Market Strategist

Good Investing!

http://gainspainscapital.com

PS. If you’re getting worried about the future of the stock market and have yet to take steps to prepare for the Second Round of the Financial Crisis… I highly suggest you download my FREE Special Report specifying exactly how to prepare for what’s to come.

I call it The Financial Crisis “Round Two” Survival Kit. And its 17 pages contain a wealth of information about portfolio protection, which investments to own and how to take out Catastrophe Insurance on the stock market (this “insurance” paid out triple digit gains in the Autumn of 2008).

Again, this is all 100% FREE. To pick up your copy today, got to http://www.gainspainscapital.com and click on FREE REPORTS.

Graham also writes Private Wealth Advisory, a monthly investment advisory focusing on the most lucrative investment opportunities the financial markets have to offer. Graham understands the big picture from both a macro-economic and capital in/outflow perspective. He translates his understanding into finding trends and undervalued investment opportunities months before the markets catch on: the Private Wealth Advisory portfolio has outperformed the S&P 500 three of the last five years, including a 7% return in 2008 vs. a 37% loss for the S&P 500.

Previously, Graham worked as a Senior Financial Analyst covering global markets for several investment firms in the Mid-Atlantic region. He’s lived and performed research in Europe, Asia, the Middle East, and the United States.

© 2012 Copyright Graham Summers - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Graham Summers Archive

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