Fed Monetizing $600B in Government Bonds - DFWstangs Forums
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post #1 of 106 (permalink) Old 11-03-2010, 12:40 PM Thread Starter
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Fed Monetizing $600B in Government Bonds

Funny that they announce the the day after the election. Either trying to minimize the damage that was done yesterday. OR (and this is my theory) someone got butt hurt and decided to totally fuck everyone.

Edit: Maybe I don't understand this. They're purchasing U.S. Government Bonds. But for what purpose does that serve when the fed is essentially the holder of the bonds in the first place since there isn't a clear distinction between the United States Federal Government and the Federal Reserve...

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post #2 of 106 (permalink) Old 11-03-2010, 12:42 PM
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The first of many things that will take place before January.

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post #3 of 106 (permalink) Old 11-03-2010, 01:05 PM
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What does this mean?
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post #4 of 106 (permalink) Old 11-03-2010, 01:19 PM
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Everyone has known this was coming for months now. They weren't sure of the amount but the consensus was $500 billion to $1 trillion.

Essentially, inflation is very very low right now and the government wants to avoid a deflationary spiral where prices start to decrease. A little bit of inflation is actually good for the economy in a lot of ways.

What happens in this situation is that the Fed actually creates money out of thin air and buys these securities. The net effect is that they increase the money supply and this should make it easier for banks to lend and in turn, it will spur the growth of businesses that need credit. It also devalues the dollar relative to other currencies and makes imports cost more here and American produced goods cost less in foreign markets.

Now I'll open the floor to wild emotional outbursts, Dave Ramsey style pissings about debts and conspiracy theories about how the world is going to end. 3....2.....1 GO!

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Last edited by AL P; 11-03-2010 at 04:46 PM.
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post #5 of 106 (permalink) Old 11-03-2010, 01:23 PM
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What does this mean?
$600 billion more dollars are being printed.

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post #6 of 106 (permalink) Old 11-03-2010, 01:23 PM
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Everyone has known this was coming for months now. They weren't sure of the amount but the consensus was $500 billion to $1 trillion.

Essentially, inflation is very very low right now and the government wants to avoid a deflationary spiral where prices start to decrease. A little bit of inflation is actually good for the economy in a lot of ways.

What happens in this situation is that the Fed actually creates money out of thin air and buys these securities. The net effect is that they increase the money supply and this should make it easier for banks to lend and in turn, it will spur the growth of businesses that need credit. It also devalues the dollar relative to other currencies and makes imports cost more here and Americans produced goods cost less in foreign markets.

Now I'll open the floor to wild emotional outbursts, Dave Ramsey style pissings about debts and conspiracy theories about how the world is going to end. 3....2.....1 GO!
So basically, an artificial inflation?

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post #7 of 106 (permalink) Old 11-03-2010, 01:24 PM
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Woohhooo new money. I love the smell of new money, too bad it isn't worth shit.
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post #8 of 106 (permalink) Old 11-03-2010, 01:28 PM
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It also devalues the dollar relative to other currencies and makes imports cost more here and Americans produced goods cost less in foreign markets.

Ok, I understand inflation is good, and all that jazz. The snippet above is what I don't understand. I understand what they are trying to stop from happening, I get that inflation is good. But why would anyone, in their right mind, want the above?
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post #9 of 106 (permalink) Old 11-03-2010, 01:33 PM
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What does this mean?
It means Geor! has been living under a rock.
It means there are a lot of people here googling "monetizing" right now.
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post #10 of 106 (permalink) Old 11-03-2010, 01:36 PM
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Ok, I understand inflation is good, and all that jazz. The snippet above is what I don't understand. I understand what they are trying to stop from happening, I get that inflation is good. But why would anyone, in their right mind, want the above?
I think Barry is trying to outdo Carter. The only thing that Barry has not exceeded Carter at, is inflation. 10% unemployment and double-digit inflation is the shit!

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post #11 of 106 (permalink) Old 11-03-2010, 01:36 PM
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ok, i understand inflation is good, and all that jazz. The snippet above is what i don't understand. I understand what they are trying to stop from happening, i get that inflation is good. But why would anyone, in their right mind, want the above?
c+i+g+(x-m)
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post #12 of 106 (permalink) Old 11-03-2010, 01:37 PM
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It means Geor! has been living under a rock.
It means there are a lot of people here goolging "monetizing" right now.
www.goolging.com
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post #13 of 106 (permalink) Old 11-03-2010, 01:37 PM
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So basically, an artificial inflation?
You can say artificial. The Fed has been doing this for decades, trying to control inflation using this tool. In high inflation years they will sell these securities and take money out of the system.

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post #14 of 106 (permalink) Old 11-03-2010, 01:37 PM
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c+i+g+(x-m)
Okay, dammit! English! ENGLISH!

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post #15 of 106 (permalink) Old 11-03-2010, 01:38 PM
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You can say artificial. The Fed has been doing this for decades, trying to control inflation using this tool. In high inflation years they will sell these securities and take money out of the system.
Ah. So more of a regulatory move?

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post #16 of 106 (permalink) Old 11-03-2010, 01:40 PM
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Ok, I understand inflation is good, and all that jazz. The snippet above is what I don't understand. I understand what they are trying to stop from happening, I get that inflation is good. But why would anyone, in their right mind, want the above?
You have to remember that part about it being "relative" to other currencies. The value of a dollar only really matters in how it relates to other currencies. The sorry ass Chinese have been keeping their currency value low in relation to the dollar for a long time now. We asked them to stop, they wouldn't so now we are going to devalue that dollar. Why wouldn't we since this is a great time to try to fuck them, inflation is very low so let's fuck those communist bastards if we can! They certainly deserve it.

Actually they are devaluing their currency too, little fuckers.

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post #17 of 106 (permalink) Old 11-03-2010, 01:41 PM
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Most excellient! Corporate rates at historic lows and the economy is floundering. An extra 1/4% will fix the world.
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post #18 of 106 (permalink) Old 11-03-2010, 01:42 PM
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I'm going to need you to repeat that in retardese, please sir.
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post #19 of 106 (permalink) Old 11-03-2010, 01:43 PM
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You have to remember that part about it being "relative" to other currencies. The value of a dollar only really matters in how it relates to other currencies. The sorry ass Chinese have been keeping their currency value low in relation to the dollar for a long time now. We asked them to stop, they wouldn't so now we are going to devalue that dollar. Why wouldn't we since this is a great time to try to fuck them, inflation is very low so let's fuck those communist bastards if we can! They certainly deserve it.

Actually they are devaluing their currency too, little fuckers.
Chinese are manipulating their currency just like everyone else. So the winner is the first one to force their currency value to zero. I guess Zimbabwe is what we are shooting for?
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post #20 of 106 (permalink) Old 11-03-2010, 01:45 PM
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Ah. So more of a regulatory move?
It is a regulatory move. Over time the dollar is supposed to lose value very slowly. People see this sort of thing and start screaming about the end of the world. It happens EVERY time the Fed tries to bring about inflation.

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post #21 of 106 (permalink) Old 11-03-2010, 01:46 PM
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Chinese are manipulating their currency just like everyone else. So the winner is the first one to force their currency value to zero. I guess Zimbabwe is what we are shooting for?
yes, let's engage in hyperbole. Because we all know there are only two extremes here. They are:

1) What the dollar is worth today
2) zero

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post #22 of 106 (permalink) Old 11-03-2010, 01:49 PM
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yes, let's engage in hyperbole. Because we all know there are only two extremes here. They are:

1) What the dollar is worth today
2) zero
Ok, so I guess the FED is wanting people to speculate more in risky investments. I see the big commodity bubble getting bigger.
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post #23 of 106 (permalink) Old 11-03-2010, 01:54 PM
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I'm going to need you to repeat that in retardese, please sir.
It's the formula for aggregate demand sir...

Y=the equilibrium level of national income
C=domestic household consumption of goods and services
I=domestic real investment in buildings, equipments, software, and inventories
G=government spending on goods and services
X=foreign purchase of the country's exports of goods and services
M=the country's purchase of import of goods and services from other countries


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post #24 of 106 (permalink) Old 11-03-2010, 01:55 PM
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Ok, so I guess the FED is wanting people to speculate more in risky investments. I see the big commodity bubble getting bigger.
I'm sure that is what they have in mind. It all makes perfect sense!

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post #25 of 106 (permalink) Old 11-03-2010, 02:00 PM
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Turn on the printing press and devalue the dollar some more. We seriously need to throw the FED the fuck out of this country.
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post #26 of 106 (permalink) Old 11-03-2010, 02:04 PM
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Turn on the printing press and devalue the dollar some more. We seriously need to throw the FED the fuck out of this country.
Turn that sumbitch up on the HIGH setting, I want to rape the Chinese in the mouth.

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post #27 of 106 (permalink) Old 11-03-2010, 03:41 PM
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Everyone has known this was coming for months now. They weren't sure of the amount but the consensus was $500 billion to $1 trillion.

Essentially, inflation is very very low right now and the government wants to avoid a deflationary spiral where prices start to decrease. A little bit of inflation is actually good for the economy in a lot of ways.

What happens in this situation is that the Fed actually creates money out of thin air and buys these securities. The net effect is that they increase the money supply and this should make it easier for banks to lend and in turn, it will spur the growth of businesses that need credit. It also devalues the dollar relative to other currencies and makes imports cost more here and Americans produced goods cost less in foreign markets.

Now I'll open the floor to wild emotional outbursts, Dave Ramsey style pissings about debts and conspiracy theories about how the world is going to end. 3....2.....1 GO!
so r u like a professional financial adviser or something
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post #28 of 106 (permalink) Old 11-03-2010, 03:57 PM
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so r u like a professional financial adviser or something
Al P use to clean toilets and trash cans at Bear Stearns downtown office.

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post #29 of 106 (permalink) Old 11-03-2010, 03:58 PM
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Al P use to clean toilets and trash cans at Bear Stearns downtown office.
so did some of the richest men in the world
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post #30 of 106 (permalink) Old 11-03-2010, 04:12 PM
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Al P use to clean toilets and trash cans at Bear Stearns downtown office.
Yes, I did. I am glad you mentioned that because I haven't checked my Bear Sterns shares here lately.....

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post #31 of 106 (permalink) Old 11-03-2010, 04:13 PM
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so r u like a professional financial adviser or something
No, I am just some asshole on the internet and you really shouldn't listen to anything I say or Dave Ramsey will kill you.

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post #32 of 106 (permalink) Old 11-03-2010, 04:25 PM
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It also devalues the dollar relative to other currencies and makes imports cost more here and Americans produced goods cost less in foreign markets.
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Ok, I understand inflation is good, and all that jazz. The snippet above is what I don't understand. I understand what they are trying to stop from happening, I get that inflation is good. But why would anyone, in their right mind, want the above?
It should (artificially) stimulate demand for domestically-produced goods, in turn increasing hiring here. Problems will be in keeping inflation from going out of control and encouraging foreign countries to do the same with their currencies.
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post #33 of 106 (permalink) Old 11-03-2010, 04:28 PM
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so r u like a professional financial adviser or something
You're confusing Al with bullet.....look for the guy with the big sig if you want real financial advice LOL.
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post #34 of 106 (permalink) Old 11-03-2010, 05:42 PM
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so did some of the richest men in the world
Yea, I heard that dude that started Jani-King was like a bajillionaire. He still cleans toilets!

Roger Smith started out at GM putting those little cap thingies on the tires on the assembly line.

Do you know of any others?

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post #35 of 106 (permalink) Old 11-03-2010, 06:00 PM
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Yes, I did. I am glad you mentioned that because I haven't checked my Bear Sterns shares here lately.....
Orly?...

In that case

Sorry for your loss. Prayers sent.


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post #36 of 106 (permalink) Old 11-03-2010, 06:01 PM
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so did some of the richest men in the world
It was sarcasm.
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post #37 of 106 (permalink) Old 11-03-2010, 06:04 PM
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It should (artificially) stimulate demand for domestically-produced goods, in turn increasing hiring here. Problems will be in keeping inflation from going out of control and encouraging foreign countries to do the same with their currencies.
Well there are a few more things to worry about. Qualitative easing is a last step resort to solve economic woes (see Japan.)

You hope when the Fed buys those bonds that the new found cash will find its way into riskier investments that will spur the economy and job growth.

You don't really want to have that money flow into commodities or into foreign markets or fuel inflation such as to cause hyper inflation.

But the sad fact is monetary policy isn't working and with interest rates almost at 0% and no one else doing jack about the economy (private and public) its one of their last bullets to get the economy moving again.

Sadly, when qualitative easing becomes the plan it is because the Fed doesn't have any other options (i.e. plan of last resort.)

I don't think anyone in charge believes this will bring an immediate bang to the economy (they are *only* purchasing $75 billion a month) but with the Feds at a soon-to-be gridlock they have to do something.

Investing wise I'm shifting more assets to commodities and equities and selling off my bonds (more risk not less but I think it will payoff in the first 6 months of 2011.)

Business wise we're ramping up slightly and might just be able to eek out 20% growth next year after a fairly flat 2010 but we're planning on 15%. We deal with the Fortune 500/Global 1000 types and they are starting to loosen their purse strings. Our RFQ pipeline is full and our actual closed deals ratio has picked up dramatically in the last 3 months and we're not getting blow back on pricing which we've increased in the last half of the year.

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post #38 of 106 (permalink) Old 11-03-2010, 09:22 PM
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Commodities and foreign currencies
Commodities and foreign currencies
Commodities and foreign currencies
Commodities and foreign currencies
Commodities and foreign currencies
Commodities and foreign currencies
Dollar index will soon be 65
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post #39 of 106 (permalink) Old 11-04-2010, 05:40 AM
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I'm sure that is what they have in mind. It all makes perfect sense!
It does, I get it now. People will be happy when gasoline goes to $4.
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post #40 of 106 (permalink) Old 11-04-2010, 05:47 AM
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Well there are a few more things to worry about. Qualitative easing is a last step resort to solve economic woes (see Japan.)

You hope when the Fed buys those bonds that the new found cash will find its way into riskier investments that will spur the economy and job growth.

You don't really want to have that money flow into commodities or into foreign markets or fuel inflation such as to cause hyper inflation.
My fear is that with interest rates so low anyway that the money will not go to productive areas, but just to support speculation bubbles that are being blown now. Why would business people not borrow now at low interest rates and use the extra capital to support investments in business that is profitable? Why will they borrow when the rates drop another 1/4 point. They won't. There has been huge money running in to bonds, hoping that they FED will be the "bigger fool" to pay the higher price. When the money is all gone, who is going to support the bond prices at this level? Which way are interest headed and how fast?

Direct government intervention in the free market never ends well. I am surprised at some people that say they support free choice and free markets, cheer the government take over of capital markets.
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post #41 of 106 (permalink) Old 11-04-2010, 06:10 AM
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Silver is going nuts!

Just sayin'...
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post #42 of 106 (permalink) Old 11-04-2010, 06:28 AM
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Silver is going nuts!

Just sayin'...
The entire market is liking it.

Quote:
The Federal Reserve released details of its plan to initiate quantitative easing and the market index values rallied towards end of day close yesterday. The Dow experienced its best close in over 2 years as it responds in a positive way to the policy report released by the Federal reserve.
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post #43 of 106 (permalink) Old 11-04-2010, 07:08 AM
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My fear is that with interest rates so low anyway that the money will not go to productive areas, but just to support speculation bubbles that are being blown now. Why would business people not borrow now at low interest rates and use the extra capital to support investments in business that is profitable? Why will they borrow when the rates drop another 1/4 point. They won't. There has been huge money running in to bonds, hoping that they FED will be the "bigger fool" to pay the higher price. When the money is all gone, who is going to support the bond prices at this level? Which way are interest headed and how fast?

Direct government intervention in the free market never ends well. I am surprised at some people that say they support free choice and free markets, cheer the government take over of capital markets.
Companies are holding a trillion dollars in cash. No need to borrow because there isn't any expansion.

I get your point and it is the reason why so many don't think the Fed's actions are going to amount to squat.

5 year yields down to a record this morning and equities up sharply pre-market with oil up $1.75/bbl.

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post #44 of 106 (permalink) Old 11-04-2010, 07:41 AM
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Companies are holding a trillion dollars in cash. No need to borrow because there isn't any expansion.

I get your point and it is the reason why so many don't think the Fed's actions are going to amount to squat.

5 year yields down to a record this morning and equities up sharply pre-market with oil up $1.75/bbl.
Exactly, companies don't need to borrow.

But I am convinced that, beyond the China issue, this wasn't necessarily done for companies but rather for individuals. The Fed is aware of the trillion dollars sitting on public balance sheets. But business won't expend without some uptick in demand. Since over half of households hold shares in some capacity, today we are all supposed to look at our accounts and see new wealth and decide to increase our consumption.

EDIT: I can't even log onto my Etrade account right now, the site must be backed up with people logging in. Did someone tell the sheep? Hmmmm....
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post #45 of 106 (permalink) Old 11-04-2010, 07:47 AM
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I can't even log onto my Etrade account right now, the site must be backed up with people logging in. Did someone tell the sheep? Hmmmm....
Nothing like watching sheep trying to get on board after the ship has already set sail LOL
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post #46 of 106 (permalink) Old 11-04-2010, 08:14 AM
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Quote:
Originally Posted by 01WhiteCobra View Post
Companies are holding a trillion dollars in cash. No need to borrow because there isn't any expansion.

I get your point and it is the reason why so many don't think the Fed's actions are going to amount to squat.

5 year yields down to a record this morning and equities up sharply pre-market with oil up $1.75/bbl.
Yes, a misallocation of capital can only be fixed by time, not by creating more or bigger misallocations. Inflation does not help the poor, seniors and people on fixed incomes. Who is the FED trying to help?
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post #47 of 106 (permalink) Old 11-04-2010, 01:25 PM
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Woohoo! Oil up over 2% getting near 52 week high! Gold up over 3.5%. Near 52 week high. Yeah for inflation. Everyone feel better?
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post #48 of 106 (permalink) Old 11-04-2010, 01:32 PM
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I made a couple grand today so yes I feel good if you must know.
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post #49 of 106 (permalink) Old 11-04-2010, 01:36 PM
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Silver up 5.19%... outperforming gold as usual
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post #50 of 106 (permalink) Old 11-04-2010, 01:47 PM
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Now I know how bullet feels on a daily basis
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