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Bo Peng
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I run a fund based on automated trading and technical analysis. But my favorite pastime is thinking and talking about political economy. I guess I'm George Soros. Writing helps clarifying my thinking. All opinion expressed here is mine, wholly mine, nobody's but mine. And all trading/investment... More
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  • QE2 Sell-the-news Starts Early? 1 comment
    Oct 27, 2010 4:39 AM | about stocks: GLD, PHYS, UUP, UDN, SPY
    Here's a preview of QE2, from WSJ and footnoted by FT Alphaville: a few $Bs of treasury purchases over a few months. This is so Japan-lost-decadey that it will surely trigger a preliminary sell the news today. Frontrunning the fed is so July. The new trade is frontrunning the Fed frontrunners.

    Expect surge in USD and drop in stocks, gold, commods. Treasuries and TIPS are harder to predict.

    I wrote early last week that the timid nature of QE2 is to be expected. The argument has only been strengthened by the earnings and economic news since then. Even Heli Bernanke now has a hard time arguing for a bazooka QE2. The market's expectation of QE2 has moderated a bit, but clearly still unrealistically high. My guess, which differs from that of FT Alphaville's, is that Fed has realized the danger of sudden disappointment, thus decided to leak the plan in hope of a softer blow.

    So instead of one big crash on 11/3, we'll get two crashes, 10/27 and 11/3. Let's see how well this plan works out.




    Disclosure: None
    Themes: Market outlook, macroview Stocks: GLD, PHYS, UUP, UDN, SPY
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  • baystoeninc
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    Comments (33) | Send Message
     
    When everyone expects something to happen, it might not happen.
    27 Oct 2010, 09:16 PM Reply Like
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