QE2: My Predictions
Back in November, I made some predictions about the then upcoming second round of Quantitative Easing, aka QE2.
In short, I predicted that QE2 would disappoint the market. As a consequence, I thought that most asset classes would trend lower as the dollar strengthened.
I hoped that such an action would occur, because I believed, and still believe, that the commodity market still has plenty of upside, but that such a disappointment would create a stellar buying opportunity to load up on my favorite commodities.
I was wrong, of course. Bernanke’s announcement of $600 billion only encouraged the markets higher.
Everything’s more expensive now – which is exactly the type of market movement that’s highly unlikely if not completely impossible under normal circumstances. Normally, if widget X goes up in price, commodity Y and wage Z will fall. Normally, prices don’t all rise at once…
But we’re not in normal circumstances. Ben Bernanke and the Fed are backstopping every major asset class with massive influxes of fake money, because they’ve been hardwired by Keynesian dogma to think that higher priced everything is a sign of growth, prosperity and a job well done.
They’re wrong of course. Higher priced stocks are great for people who bought them when they were lower in price, but they do not help the job market, or the mortgage market or the across the board standard of living anymore than the outcome of a lottery does.
His actions only redistribute wealth to well connected wealthy bankers, corporations and bureaucrats.
They take it from middle class savers. They don’t realize that by killing the middle class, they’re killing the economy, tax receipts, job creation and growth.
So now we’re coming up again on the expiration of QE, and this time it will not be immediately renewed.
So I’m going back to my predictions from November.
As the market realizes that another round of funny money is NOT coming to backstop stocks, commodities and bonds, we’ll see these asset values crash.
But remember: the thesis for higher priced commodities is still intact.
Use any price corrections as an opportunity to go shopping for your favorite commodities.
I know I’ll be looking forward to bargain basement prices for physical gold and silver, as well as oil companies, agriculture stocks and maybe a handful of gold juniors.
Make your shopping list now, and be ready to buy this summer.
And hey, if I’m wrong again, and there’s another immediate round of QE, then we can all look forward to another 6 months of Fed sponsored “prosperity.”
Good investing,
Kevin McElroy
Editor
Resource Prospector
