After hearing yet another professional stock guy on CNBC mention QE3 like it was still a real possibility, I have to ask the question:
Are these guys completely oblivious, stupid, or in just simply in denial?
The thing that had me laughing yesterday (it was either laugh or cry) was how completely out of touch this one trader clearly was. His reasoning for being bullish on stocks is that we’re in a win-win situation. We’ll either get good economic growth or QE3, he suggested.
Wow! Really? Those are the only two possible courses? Might want to re-think that. And this was a professional on the floor of the NYSE!
I don’t know what these stock guys are looking at or paying attention to, but it’s not the same stuff the fixed income and forex folks are following. Those of us in the latter markets heard Bernanke say at his press conference that it would take something very significant for the Fed to embark on QE3 as he feels the inflationary risks outweigh any potential benefit. This has been backed-up by other Fed speakers since, and the minutes from the last meeting of the FOMC, released yesterday, focused a lot on exit strategy.
Either a strong economy or QE3? It’s that sort of brilliant analysis that confirms the view of fixed income and forex market folks that the equity markets are always the last to figure things out. Remember how stocks rallied right into October of 2007 even after it was clear months before that from what was happening in interest rates and currencies that something was very wrong?
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