Adam Davidson’s article “Hey, Big Saver!” in the New York Times is an excellent summary of the competing arguments on the merits of QE3. There truly are compelling arguments for why this will work and there are compelling arguments why it won’t. Effectiveness aside, Bernanke has made his intentions perfectly clear:
When Bernanke announced that the Fed would be investing in the mortgage market indefinitely, he signaled that he’s had it with short-term fixes. His Fed is committed, he said, to taking extraordinary measures until unemployment goes down. In Fed-speak, Q.E. 3 is a clear message to banks, investors and private companies that the economy is going to grow, and the riskiest thing they can do is to hold on to their cash and riskless securities and watch their competitors profit.
Are his policies working or not? This is why I love technical analysis. Rather than get caught up in theoretic debates, technical analysis cuts to the chase and asks a different question: What stocks, sectors, and asset classes have the best relative strength? Based on that information, relative strength investors can orient their portfolio to capitalize on those trends.
Investors are not interested in winning theoretical debates. Investors are interested in making money! Rather than focusing on what the Fed, Congress, the President, the ECB, banks, consumers, economists, investment strategists, your brother-in-law… have to say about what is going to happen in the market, take the pragmatist’s approach and let relative strength dictate your investment decisions.
Source: CBS News
