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In the face of stagnant wages, higher food and energy prices act as a tax on nearly all...

In the face of stagnant wages, higher food and energy prices act as a tax on nearly all consumers, negating the narrowly dispersed wealth effects from higher equities. Hoisington Capital concludes QEII to be ineffective at increasing aggregate demand, and remains bullish on long-term Treasuries.
Comments (10)
  • Harry Tuttle
    , contributor
    Comments (2221) | Send Message
     
    QEII is very effective. It is meant to stimulate the US equity market and nothing more.

     

    Any talk about mortgages (now more expensive), employment (mostly outside of the US), and other real economy variables is only a veiled attempt by Bernanke et al to obscure the fact that they do NOT know what else to do.
    14 Jan 2011, 05:34 PM Reply Like
  • wyostocks
    , contributor
    Comments (7739) | Send Message
     
    Agree.
    However, somebody tell Ben that sometimes doing nothing is the best course of action. Why does every schmuck in Washington think they have to ride the great big horse and act like superman.
    Ben's book is to follow Alan, talk gibberish, look collegate, and sink the country.
    14 Jan 2011, 05:46 PM Reply Like
  • Harry Tuttle
    , contributor
    Comments (2221) | Send Message
     
    The responsibility is always with "We the people"

     

    Bernanke is allowed to play God because people either want to believe what he says of benefit from what he does. He was recently reappointed by the president who is elected by the majority. Do you think the next campaign is going to be about Bernanke? neither do I.
    14 Jan 2011, 06:08 PM Reply Like
  • Tack
    , contributor
    Comments (13037) | Send Message
     
    This article's conclusion is in error, making the usual "fixed-sized-pie" error, i.e., that if goods cost more, less money must be available for other stuff. The reality is that monetary expansion always results in the nominal price of everything increasing, if not immediately, then eventually. This includes the nominal increase of revenues, costs, incomes, and share prices. Everything advances to higher nominal amounts, even if they don't really represent more "value."

     

    In such an environment, existing fixed-income investments are likely to perform poorly on a price basis.
    14 Jan 2011, 05:45 PM Reply Like
  • Harry Tuttle
    , contributor
    Comments (2221) | Send Message
     
    "This includes the nominal increase of revenues, costs, incomes, and share prices."

     

    Not really. Since income = revenue - cost, it follows that delta income may increase, stay the same or decrease depending on the relative increase of revenue and cost.

     

    If share prices are the result of discounting future income, these may go up or down depending on the revenue and cost variations as well.

     

    Most inflationary periods result, in general, in LOWER share prices because costs, in general, surprise more than revenue, because inflation erodes purchasing power, because inflation brings higher rates which compete with equities and lower the value of future income streams among other reasons.

     

    Those interested can take a look at the Brazilian equity market from 1965 through 1995. Or even the US equity market in the 70's
    14 Jan 2011, 06:04 PM Reply Like
  • Archman Investor
    , contributor
    Comments (2397) | Send Message
     
    QE2 not effective?

     

    Myself and the other 1% of Americans that own the majority of retirement assets in the US are laughing all the way to the bank.

     

    Food prices going up? What? Not a problem.

     

    Energy prices soaring? Please, tell it to someone who cares.

     

    Massive personal debt? Ha. I haven't had any in years. I leave all that debt accumulation to the other 90% of Americans who just "have to have" the latest I-phone that replaces the very same one they bought just 6 months earlier.

     

    Stagnant wage? Oh for goodness sakes. With multiple streams of income and massive monthly dividends flowing into my account I can sit back and watch all the college illiterates fighting to get on the next episode of Jersey Shore in the hopes that they will never have to work a real days work in their lives. (Thank God for Mixed Martial Arts and pornography for fat girls cause all our boy and girl college graduates might not have anything to do when they cannot find real jobs in life. Darn it that ole Liberal Arts degree based on nothing just doesn't go as far anymore)

     

    Heck how long till QE3?
    I expect the FED to annouce fresh, massive MBS, muni buying sometime close to summer or fall.
    Sounds about right.
    14 Jan 2011, 05:54 PM Reply Like
  • Duude
    , contributor
    Comments (3371) | Send Message
     
    Ah, but the downside begins with the eventual end of quantitative easing. There will be an end. Its only a question of when, not if.
    15 Jan 2011, 12:31 PM Reply Like
  • HiSpeed
    , contributor
    Comments (1073) | Send Message
     
    What higher higher food and energy prices? The govt numbers say inflation is barely 1%! Of course, if you've done any shopping for, well, anything recently, you know otherwise.
    14 Jan 2011, 06:05 PM Reply Like
  • kknucklehead
    , contributor
    Comments (111) | Send Message
     
    Not only is the fed policy ignorant and short-sighted...it should be illegal...

     

    Since America's approximate exposure to the markets is around 40%...

     

    It is so illogical that I am surprised that more people are not screaming...

     

    we are exactly back where we were...

     

    Except they are not hiring...they are moving jobs overseas and they are either buying back their own stock, retiring their debt, or acquiring another company which will lead to massive layoffs...

     

    The worst possible leadership I could of ever envisoned....

     

    Woe be to our children and their children...
    14 Jan 2011, 08:54 PM Reply Like
  • Joe Snow
    , contributor
    Comments (264) | Send Message
     
    And to think the Democrats were against extending the Bush tax cuts. We'd be paying both higher prices and higher taxes if we left it to them.
    15 Jan 2011, 11:45 AM Reply Like
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