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The end of QEII could bring tough sledding for shares, says Byron Wien, who believes most of the...

The end of QEII could bring tough sledding for shares, says Byron Wien, who believes most of the Fed's printed cash went into financial assets, not the economy. "They've done as much as they can get away with," he claims, "I just don't think they can keep on pumping money into the system."
Comments (13)
  • Rjjr38
    , contributor
    Comments (58) | Send Message
     
    I worry about the value of the US dollar. How long before it will no longer be the currency of choice for buying oil !!!
    13 Apr 2011, 04:48 PM Reply Like
  • Tack
    , contributor
    Comments (12964) | Send Message
     
    Well, if they stop printing QE, rates will rise along with the dollar.
    13 Apr 2011, 04:53 PM Reply Like
  • bearfund
    , contributor
    Comments (1534) | Send Message
     
    Who cares? The series of transactions required looks like this:

     

    - consumer sells local currency, buys dollars
    - consumer sells dollars, buys oil from producer
    - producer sells dollars, buys local currency
    - producer sells local currency for goods and services, some of them possibly imported

     

    Note that the holding of dollars is transient and the actual demand for dollars depends on what the oil producer chooses to purchase, not on the unit of exchange in the oil transaction. There could just as well be a special currency unit called the lio, which must be used to purchase oil but is not otherwise accepted by anyone for anything except forex transactions. Such a scheme would have no meaningful impact on the value of the dollar. Feel free to substitute arbitrary real or imaginary units of exchange; it changes nothing.
    13 Apr 2011, 05:01 PM Reply Like
  • stmcca02
    , contributor
    Comments (195) | Send Message
     
    The sledding will be more like cross country sking...

     

    Keep interest rates low for 5 more years and then we can be like the japanese economy... NOT

     

    The short term rates will raise to insure that stock currency, and bond prices don't suffer longer than needed.

     

    Currency of the dollar what is that. I don't sense much deep value there... maybe if it paid a dividend.. haha!
    13 Apr 2011, 04:53 PM Reply Like
  • bbro
    , contributor
    Comments (9445) | Send Message
     
    Short term rates will rise and the economy will be able to handle it...
    the eurodollar futures curve doesn't have a 4% 3 month libor until
    2015....
    13 Apr 2011, 04:57 PM Reply Like
  • Berkeley Guy
    , contributor
    Comments (118) | Send Message
     
    For the most indebted nation in the history of the world, including the most indebted government in the history of the world, I would think the pain of a devalued dollar (and therefore debt relief via inflation, and low borrowing costs via low interest rates) is miles better than the pain of rising interest rates, which raises the cost of the debt that much more and also acts against inflation, thereby making the principal owed even heavier.
    13 Apr 2011, 05:25 PM Reply Like
  • Poor Texan
    , contributor
    Comments (3529) | Send Message
     
    Sounds like what Bernacke is doing.
    13 Apr 2011, 10:45 PM Reply Like
  • Berkeley Guy
    , contributor
    Comments (118) | Send Message
     
    I thought so too, but this new announcement by Obama to cut the deficit by $4 trillion does not fit in logically with that scenario.
    14 Apr 2011, 03:10 AM Reply Like
  • Windsun33
    , contributor
    Comments (4263) | Send Message
     
    What he said was $4 trillion over 12 years, which still leaves the US with a projected deficit of between 150% and 250% of what we have now.

     

    You should know by now to discount anything said by a politician. Don't forget, presidents have been saying that they have the solution to US energy problem now for over 50 years.
    14 Apr 2011, 03:27 PM Reply Like
  • Berkeley Guy
    , contributor
    Comments (118) | Send Message
     
    Did he mean reducing the annual deficit by a total of $4 trillion over 12 years, or reducing the principle on the debt by $4 trillion over four years?
    14 Apr 2011, 04:26 PM Reply Like
  • bearfund
    , contributor
    Comments (1534) | Send Message
     
    Most likely he meant that in 12 years the total net deficit (net positive increase in the debt) would be $4T smaller than it would be under some current spending plan. So if the baseline he chose would add another $15T in debt, his plan would (if its assumptions hold) add only $11T.

     

    Reducing the debt (running a surplus), reducing the absolute size of the budget in year N compared with some baseline, and even reducing the size of the deficit relative to the size in some baseline year, are never seriously discussed by prominent members of either major party. And since they don't go out of their way to publicise the baselines they use, you really have to dig to figure out what it means. The usual answer turns out to be "not much".
    14 Apr 2011, 06:13 PM Reply Like
  • Windsun33
    , contributor
    Comments (4263) | Send Message
     
    He meant that the total deficit would be $4 billion less than if we did nothing.

     

    In other words, the deficit will still grow exponentially, just with a smaller exponent.
    15 Apr 2011, 01:38 PM Reply Like
  • tigersam
    , contributor
    Comments (1711) | Send Message
     
    Byron Wien,

     

    I have simple question for you?

     

    How much QE2 money went into financial assets?

     

    How much stocks value went up?

     

    Here is the answer for you. Ratio is 1:10. After QE2 the value of financial assets went 10 folds. So if you think it is because of QE2, my recommandation is do QE3, QE4.... QEn etc.

     

    Talk something which make sense.
    13 Apr 2011, 08:41 PM Reply Like
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