Back in the 80’s there was a commentator whose name escapes me. He had a sayng , “rule number one– don’t fight the fed”.
I can’t say anything more than that. The Fed’s decision to buy 40B worth of mortgages every month with an open ended time frame is a game changer. In effect, printing money. It may be what we need to finally get jobs going again.. I hope it works. In the long term its very inflationary but give the choice of inflation or deflation, a society is probably better off with inflation. Deflation is Post Wiemar Germany and 1932 US depression.
The debt will be paid back. The value of the dollars paying it back will be devalued. As a nation, I think we all have to be united in our hope that this works. At some point, this type of fiscal activity is going to resemble “pushing on a string”.
Politically I am an independent. I think the extremes on the left and the right have conspired by accident to get us here. They will have to work together, one way or another to get us out. That eventual cooperation will come. Its any one’s guess how much uglier and more divisive the process of getting the economy “fixed” might get.
For now, any time you have inflation, that is supportive long term to commodity prices and for the action in the stock market. With interest rates dropping off a cliff, folks will be forced into stocks looking for returns.
Time will tell where this ends. For now, these levels make no real sense. However, that being said, the Dow will probably be heading towards 14,000 once again and the S&P towards 1500. For now, you have to be a fool, in my opinion to fight the tide for more than short term corrections. I’d be long, with sell stops below for stock indexes.
I still like being long gold as well.
In general, this is going to be supportive for commodities as well, because the cheaper US dollar will make our grains more attractive to the rest of the world. That’s what convential teachings in Econ 101 tell us. Will this be a text book outcome? Or a year from now are we going to be looking for a new text book?
CER