• 317 days Could Crypto Overtake Traditional Investment?
  • 322 days Americans Still Quitting Jobs At Record Pace
  • 324 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 327 days Is The Dollar Too Strong?
  • 327 days Big Tech Disappoints Investors on Earnings Calls
  • 328 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 329 days China Is Quietly Trying To Distance Itself From Russia
  • 330 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 334 days Crypto Investors Won Big In 2021
  • 334 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 335 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 337 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 338 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 341 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 342 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 342 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 344 days Are NFTs About To Take Over Gaming?
  • 345 days Europe’s Economy Is On The Brink As Putin’s War Escalates
  • 348 days What’s Causing Inflation In The United States?
  • 349 days Intel Joins Russian Exodus as Chip Shortage Digs In
  1. Home
  2. Markets
  3. Other

Video: Quantitative Easing Targets Asset Prices, Not Bank Reserves

With markets coming off of overbought levels, bullish sentiment high, and gold backing off a vertical ascent, we believe investors need to be ready for a quantitative easing (QE) disappointment pullback. A "buy the QE rumor, sell the QE news" event needs to be considered from a portfolio management perspective. Having said that we also believe most investors and many financial professionals do not fully understand how QE works in the real world and that one of QE's primary objectives is to inflate asset prices.

After hearing "QE won't matter, the money will just sit at banks as excess reserves" from talking heads several times over the past three months, we decided to put together a series of brief videos describing how quantitative easing will be implemented by the Fed and the eighteen primary broker dealers in the coming weeks and months. You may be surprised to learn the Fed is encouraging the clients of primary dealers, including hedge funds and sovereign wealth funds, to participate in the QE2 process. We have studied the quantitative easing concept in detail in order to improve the odds of producing successful outcomes for CCM clients.

Common sense tells us money printing is probably not the path to long-term prosperity and low unemployment, but common sense also tells us after a possible QE disappointment pullback, newly printed U.S. dollars will be finding their way into the global stock, commodity, and currency markets. The big questions are (a) how much QE is coming in terms of a dollar amount, and (b) how much of that money will find its way into the financial markets.

After watching the video below, you may decide quantitative easing is more about inflating the money supply and asset prices, and less about bank reserves and interest rates. We will post five additional videos on quantitative easing over the next week or so, expanding on the concepts presented in the first video, "Quantitative Easing -- How Does it Work in the Real World?" A larger version of the flow chart in the video is available below the video player.

Quantitative Easing Flow Chart

 

Back to homepage

Leave a comment

Leave a comment