QE 3 Didn’t Work… Why Would QE 4?

The primary market forces remain in play.

The markets are holding up on hopes of additional stimulus from the Central Banks. Some bulls are even calling for QE 4 at the upcoming Fed meeting, despite the fact that QE 3 was launched a mere three months ago and was open-ended (meaning it would not end until the Fed deemed it time).

This is extraordinary and proves point blank my concern that we’d reach the point at which additional monetary stimulus would no longer having a significant impact. This was always the End Game for the Fed’s response to the financial crisis: that by intervening as much as it did, eventually we’d get to the point that even extreme interventions had little if any impact.

Given that the Fed has been the primary driver of stocks for the last four years (even the NY Fed admits the S&P 500 would be at 600 without Fed intervention) this is a major red flag that we could be due for a sharp correction to the downside.

Against this backdrop of hopes for more intervention, the ugly fundamentals continue to worsen. As I indicated in yesterday’s missive, there is little if any political incentive for the Democrats or the GOP to address the fiscal cliff. Consequently we are very likely going over it.

In Europe, the great banking crisis continues to worsen. The EU has definitively lost one of its primary AAA supports when France was downgraded. Moreover, the mega-bailout fund, the ESM, has been downgraded as well.

The implications of this are mainly pertinent to the banks. Sovereign bonds are the primary collateral backstopping hundreds of trillions of Euros worth of trades at the large EU banks. With France no longer AAA and the ESM losing a rating as well, a scramble for AAA collateral is underway. This will be beneficial to Treasuries, bunds, and other high-grade bonds (high grade relative to non-AAA rated collateral). It will be bad for low-grade collateral bonds (Spanish, Greek, Italian, etc.).

Thus, stocks continue to seesaw. The fundamentals want to pull stocks down while the hope of more intervention from Central Banks pushes stocks up.

The one thing that trumps this is the fiscal cliff. Since there is little likelihood of a solution, we are likely to see heavy selling from institutions in the coming weeks (see Apple’s recent action) as they close out positions before the tax increases.

This will put selling pressure on the markets. Combined with the ongoing EU debacle, this makes for a potentially very ugly sell-off into year-end.

After that, we’ll see… but 2013 is shaping up to be an absolutely hellacious year. We have:

  1. The EU’s banking crisis.
  2. A global economic contraction.
  3. The implosion in corporate profits.
  4. Heightened inflation from the Fed’s money printing.

If you’re an individual investor (not a day trader) looking for the means of profiting from all of this… particularly the US going over the fiscal cliff… then you NEED to check out  my Private Wealth Advisory newsletter.

Indeed, 74 out of our last 88 trades have made money for Private Wealth Advisory subscribers. That’s an incredible 84% success rate on our investments.

And we’re not getting complacent by any means. In fact, I’m about to alert Private Wealth Advisory subscribers to several trades that will all produce HUGE profits when the we go over the fiscal cliff in the coming weeks.

You’ll find out what they are the minute you subscribe to Private Wealth Advisory. You’ll also gain immediate access to my Protect Your Family, Protect Your Savings, and Protect Your Portfolio Special Reports outlining how to prepare these areas of your life for the coming Great Crisis.

These reports outline:

1) how to prepare for bank holidays
2) which banks to avoid
3) how much bullion to own
4) how much cash is needed to get through systemic crises
5) how much food to stockpile, what kind to get, and where to get it

And more…

To take out an annual subscription to Private Wealth Advisory  now… start profiting from the market’s gyrations (again we’ve made money on 74 out of 88 trades in the last 18 months)… and gain access to all my Special Reports…

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Best Regards,

Graham Summers





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