The Fed Just Ended QE.... Now what?

[jllundqu]

For several years, all I've heard about is that when the Fed ends QE, $#@! will hit the fan. The FED has been backstopping the stock market for years and every time they've hinted at ending QE, stocks plunged.

My question to the more economically-learned RPFers is this:

Now that the FED has officially ended QE (probably some unofficial QE will remain in place), what can we expect from stocks, bonds, global markets, etc?

Will they raise interest rates? Will stocks enter correction mode? Will everybody panic???????

http://www.forbes.com/sites/samantha...g-awaited-end/

[Zippyjuan]

Fed said they will not raise interest rates "for an extended period". They will also not reduce what they have already purchased- they will roll over (replace) securities as they mature. Short term market responses since the Fed statement: gold is down about $30 an ounce as of now and stocks are up over 200 based on the DOW. They seem to like what they heard yesterday.

The Fed is not the only thing boosting stocks though- GDP figures were better than expected too. http://www.cnbc.com/id/102135607

[Danke]

Stay tuned for a full transcript. In the meantime, here are some timestamps of the various topics Peter covers. To watch Peter’s recent CNBC interview that he talks about at length in this podcast, click here.

1:15 – This is the most bullish statement that Peter has seen come out of the Federal Reserve.

2:20 – Everything is great, as far as the Fed is concerned, which could mean one of two things.

3:40 – If the market starts to tank, they cannot start QE up again right away. This means the market is on its own for a while.

4:30 – Peter begins to take a look beneath the surface of the third quarter GDP figure of 3.5%.

6:00 – Consumer spending is getting worse, and Peter thinks it will continue to drop.

8:15 – On the same day the Fed announced the economy is doing good, mortgage applications fell to the lowest level in 19 years.

8:50 – Peter begins to respond to CNBC’s reaction to the Fed’s announcement.

10:30 – One of the reasons the US economy looks better than the rest of the world is because of the inordinate amount of artificial support from the Fed.

12:15 – Europe is glad that the Fed is finally ending its QE, so that the European Central Bank can begin its own currency debasement.

13:00 – Peter looks at the Swedish economy, which people are saying needs more inflation. Will Sweden follow in the footsteps of Switzerland and peg their currency to the unstable euro?

14:20 – In a CNBC viewer survey, 60% responded that QE did not help the economy.

16:30 – The hard part is not starting QE; the hard part is stopping QE and raising interest rates back to normal levels.

17:45 – Alan Greenspan does not agree that the economy is in better shape, and told the Council of Foreign Relations that the Fed cannot end QE without causing market turmoil.

19:50 – Why did Greenspan wait until the end of QE to criticize it?

21:25 – Greenspan told the New Orleans Investment Conference that he believes the price of gold will go up, because inflation is going to rise.

23:00 – Greenspan has admitted that the Fed is not independent from the government at all.

24:30 – Greenspan said that a gold standard is inconsistent with the welfare state, because it prevents politicians from acting recklessly and irresponsibly.

25:50 – Peter is believes that QE4 is coming, though it might take a while for the market to realize that it is necessary.

29:55 – The fundamentals for gold going to $5,000 are still intact.

30:15 – Peter does not recommend that people risk their savings on gold futures contracts or take out loans to buy the metal. He just cautions that the economy is going to eventually get worse and physical gold bullion is a good hedge against that reality.

33:00 – It would have been easier for the Fed to start QE again if they’d simply paused it, rather than ended it. Now there will need to be major market turmoil to start it up again.

34:30 – The Fed is playing a game of chicken with the economy

[Zippyjuan]

25:50 – Peter is believes that QE4 is coming, though it might take a while for the market to realize that it is necessary.

Peter is always calling for QE infinity. He said QE3 would never end and it did.

29:55 – The fundamentals for gold going to $5,000 are still intact.

Dropped below $1200 today- resuming its decline from its 2011 high. It would have to quadruple to get to $5,000.

21:25 – Greenspan told the New Orleans Investment Conference that he believes the price of gold will go up, because inflation is going to rise.

Greenspan did say in "the next five to ten years" inflation will be higher. http://economix.blogs.nytimes.com/20...ees-inflation/

6:00 – Consumer spending is getting worse, and Peter thinks it will continue to drop.

Consumer spending up again last month.

The economy's higher-than-expected growth last quarter was due in part to a 1.8 percent rise in consumer spending.

http://www.usnews.com/news/articles/...nds-35-percent

[Danke]

Ominously, Greenspan warned at the New Orleans Investment Conference that the Fed’s balance sheet is a “pile of tinder” and gold is a “good place to put money these days” as it will rise “measurably” in the next 5 years.

He told the CFR that the bond buying program was ultimately a mixed bag. He said that the purchases of Treasury and mortgage backed securities did help lift asset prices and lower borrowing costs. But it didn’t do much for the real economy.

“Effective demand is dead in the water” and the effort to boost it via bond buying “has not worked,” Greenspan said. Boosting asset prices, which aids the already wealthy, however, has been “a terrific success.”

When asked about QE, Greenspan made the unusually frank admission that “the Fed’s balance sheet is a pile of tinder, but it hasn’t been lit … inflation will eventually have to rise.”

Read more at http://www.maxkeiser.com/2014/10/fed...y6HF1f7ECvk.99

[Zippyjuan]

Thanks for the additional info. Greenspan has been a supporter of gold for a long time- this is not new for him. Article from 1966: http://www.constitution.org/mon/greenspan_gold.htm

Though most of his asset are (or at least were- this is from 2001) Treasury Bills.
http://articles.latimes.com/2001/aug...iness/fi-31608

Federal Reserve Chairman Alan Greenspan's personal financial holdings were valued at $3.1 million to $9.6 million at the end of last year, according to a federal financial disclosure report.

The bulk of Greenspan's assets, from $2.25 million to $7.5 million, were held in an individual retirement account at CIBC Oppenheimer Corp. invested entirely in U.S. Treasury bills.

The Fed chairman reported no holdings of stocks.

Greenspan reports his wealth in broad ranges. His largest individual holding was a Treasury bill that matured this last Feb. 1 and was reported to be worth $1 million to $5 million.

The Fed chairman also held $650,000 to $1.5 million worth of Treasury bills in direct deposit accounts. He held assets in four money market accounts and savings and checking accounts at the Federal Reserve's credit union, according to the report.

[GunnyFreedom]

I always said it would hit the fan if they didn't stop QE. That they actually stopped means the economy may coast along a little longer before the major inflationary pressure kicks in. my 2¢

[Brian4Liberty]

Could have some deflation before inflation. Never know. If deflation starts, they will do everything in their power to prevent it. More QE, for instance.

[oyarde]

Well, they cannot raise interest . Gold is about back to where it started the yr , oil is cheap , gas and diesel are not .Long term , metals look better than most things to me . There is nothing on the S & P or much on the Nascrap to tempt me . I still dump in my 6 % but I do not have much faith in it.I expect food to continue to rise .

[Brian4Liberty]

Gold and silver going down.