One Door Closes Another Opens

On Wednesday, to no one’s surprise, Janet Yellen & Co. ended the Fed’s 5+ year experiment of purchasing assets in the treasury and mortgage backed securities market, also known as quantitative easing (QE) or money printing. I won’t rehash all of the reasons why I continue to believe this is a misguided strategy, but it is.

Before the ink was even dry on the statement, the Bank of Japan completely caught the markets off guard last night with another ramp up of their own QE, buying more bonds, extending maturities and really ramping up their purchase of stocks using ETFs and REITs. I have said this since Abenomics (Japan’s version of our QE but on steroids) was launched in Japan, this will go down as the greatest financial experiment in history. Japan is going to print until the world runs out of ink!

And the European Central Bank (ECB) isn’t far behind.

Many are left to wonder what our markets and economy are left with in a post QE America. In a vacuum, the end of QE is headwind, however, with Japan going on even more steroids and the Europe about to begin QE, I don’t view it as a negative just yet. That time will come down the road.

For now, my thesis remains the same. Markets gave us a golden opportunity to buy a few weeks ago and I hope people took advantage of that. It was easy in real time and I wrote about the bottoming forming as it took place. The bull market is old, wrinkly,  but still very much alive. Rallies should get more selective from hereon and it will be interesting to see where leadership comes from.

Markets really need to see the high yield sector step up and rally! Odds favor it will.

Happy Halloween! One of my favorite holidays. Can’t wait to take the kids out tonight and then come home for some adult beverages.

Enjoy the weekend and be safe…

If you would like to be notified by email when a new post is made here, please sign up, HERE.

If you would like to be notified by email when a new post is made here, please sign up HERE

Paul Schatz, President, Heritage Capital
Paul Schatz, President, Heritage Capital
If you have at least $250,000 of investable assets and would like to schedule a complimentary meeting, call, or video conference with me, please click on my calendar here email me at Paul@investfortomorrow.com or call the office directly at 203.389.3553.

Comments

  1. I think from what I read that the US may actually face a coming deflation – whatever that will do to the mkt.

    • The US has been in a strongly disinflationary environment since 1998. 2008 was as close to deflation as we have seen since the Great Depression. In my opinion deflation is 10 times more destructive than inflation which can be corrected easily by raising rates over and over and over again like we saw in the early 1980s with Paul Volcker. Deflation like we have seen in Japan since 1990 is very, very difficult to fix, especially if not dealt with swiftly and strongly. That’s the main difference between our financial crisis in 2008 and Japan. The Japanese waited and waited and waited and never had the true resolve like Bernanke and Paulson did.

      IF the US is on the verge of deflation, the rest of the world will likely implode as Europe would already be in the spiral and our markets would likely see a massive decline.

Speak Your Mind

*