Markets are only going up at the current velocity due to world wide central bank intervention. It's also no secret that central banks have been buying equities, which is unprecedented. This leads me to believe they're taking desperate actions to prop the markets up. Pull their prop away, and that leaves a huge void. We will quickly see DOW hit 10,000. Central banks can't have this happen.Mark77 wrote: ↑May 28th, 2013 5:31 pmI disagree. QE stops, bond yields spike, people seek refuge in gold and certain other hard assets that are not propped up with credit. RE prices collapse, eventually the owners of things like gold take over. At some point, even if QE isn't removed, the market will develop a revulsion to it.
I know you guys already know this, the fed's goals are to keep inflation at bay and decrease the unemployment rate to 6.5%. Their version of inflation is still within their acceptable levels, and unemployment is still an issue. So there's still a strong probability that QE will continue.
A related problem is there's no 'major' buyers for US debt, other then the feds. If they stop buying US debt, I'm pretty sure there's very few willing buyers who are willing to take the current debt risk for the low yield. The market will demand a higher yield, which the US won't be able to afford. So, again, the Feds can't allow this. QE will continue for the foreseeable future.
I believe it's difficult to argue the current 2013 rally is not being caused by the QE programs. The market will correct or even reverse when/if the stimulus decreases/stops. This is why it's appropriate to use the drug addict analogy.
Going into Withdrawl? Yes eventually, just not this year.