Wednesday, September 26, 2012

QEternity demolished

Via:  What If the Fed Has It All Wrong 

Hard not to pile on when monetary policy has become such a joke, but here is a thorough demolition of QEternity that addresses where the heads of the consumer, the ruling elite, the central bankers, and the youth of the world are at, and it ain’t pretty.  The whole article is must reading.  From the concluding remarks:

While the Fed waits for the wealth effect to take effect, the European Central Bank is also waiting for its own Godot following Draghi's magic with the ECB rules and regulations. Super Mario's "whatever it takes" promise is powerful, but not without pitfalls:

  • When, if ever, will the Eurozone achieve the necessary banking and fiscal unions?
  • Will Spain and Italy surrender before it is too late?
  • Will ever more austerity finally work?
  • When will the debt spiral stop?
  • How much longer will the Germans put up with the situation, accepting that the ECB ruins its balance sheet taking unlimited risk on behalf of the German taxpayers, risking their fiscal sovereignty to save the "reckless Southerners"?
  • How much longer will the hordes of unemployed young Europeans put up with the situation?

Bankers have indeed delivered. In truth, however, they are merely experimenting with totally unproven ways and means, hoping to gain enough time until more responsible politicians emerge. Given the significant risk still facing us until Godot arrives, investors should await more evidence that either earnings resume their uptrend or some kind of miracle(s) happen.

Equity holdings should be trimmed to conservative levels. Sustainable income should be favored. Cash earns essentially nothing, but is safe for now. Gold remains attractive for many, many obvious reasons.

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