QE1 was necessary to prevent a meltdown, however QE2 is a bad gamble on investor savvie & wisdom.
The main reason investors went into treasuries with low yields was a safe haven in a time of financial market chaos and fear... A host of recent company results give high quality shares a much better alternative investment strategy.
Today greed is quickly taking the place of fear... With commodities and shares going up and the dollar down, the risks within of the fed's QE2 policy far outweighs the gains it may achieve in the short term.
As smart investors in treasuries head for the exit in droves, watch out for a possible 5% yield on the long bond within a few months and a much bigger rise in yield in 2011.
As the saying goes; "You can fool some of the people, all of the time and all of the people, some of the time, but you cannot fool all the people, all of the time."
Disclosure: long TBT