Not Just Paraphrasing Shakespeare, This Is a Legitimate Question: To QE or Not to QE, That Is the Question, Says Dawn Bennett, CEO of Bennett Group Financial Services
Washington, DC -- (ReleaseWire) -- 10/30/2014 --To QE or not to QE, that is the question, says Dawn Bennett, CEO of Bennett Group Financial Services in her latest missive to investors.
That is the question everybody has on the brain, she says. And here’s why…last week we had really lousy U.S housing numbers, troubled earnings and revenue in the (usually very defensive) food and drink industry as McDonald's and Coca-Cola had plunging sales worldwide. IBM took a dive after it abandoned its long-term earnings target and posted sharply lower third-quarter profits. But, the icing on the cake was the horrifying announcement that approximately twenty five banks in the Euro-zone failed the ECB (European Central Bank) stress test.
Last week across the board was pretty bad except for the slice of sunshine that came from Apple Computers magical quarterly numbers. It was the only company that really did well. The S&P 500 had its biggest low to high swings since December of 2011, and the S&P 500 went above its 100-day moving average, which to many was a good sign, proving once again that the U.S. markets are healthy…right? Not. According to the Federal Reserve, all seems to be right with the world, at least that's what these manipulators behind the curtain want investors to believe.
But here is the deal…according to our calculations, the Fed only has one billion dollars left to inject into the U.S. stock market. So investors should ask themselves, are the U.S. markets and economy strong enough to stand on their own? It’s an important question. Or, will the lack of Fed monetary injection into the U.S. stock market give us a deeper correction? There is a very high degree of correlation between the Fed’s liquidity programs and the advance in the market. Previously, when the Federal Reserve stopped their monetary interventions, it lead to market decline. Will the Federal Open Market Committee announce the end of quantitative easing after its two-day meeting on Wednesday, October 29, 2014? If they don't engage in a new quantitative easing program, will the U.S. stock and bond markets have a major problem?
Quantitative Easing (QE) has been the main force behind the stock market since the rise in 2008-2009. This fact, more than anything else in the world, is responsible for the U.S. stocks at all-time highs. QE1 and QE2 had fixed deadlines for the Fed ending its quantitative easing efforts, which would allow ris k and more of a free market level back on a supply and demand basis. However, this changed when the Federal Reserve announced QE3 and QE4 that were two open-ended programs without deadlines. From that point on, it was clear that risk in the marketplace would be mispriced.
The U.S. stock and bond markets are losing their critical crutch. We will look toward the Fed’s statements on Wednesday, October 29, 2014. Yes, don’t worry, jawboning interventions are still going to occur by the Fed or the White House or anyone who has a vested interest in a higher stock market, but investors should not be fooled. As it has in the past, the sweet talk will lull us with a quick run up in the markets, but is not going to do anything on a long term, consistent basis, because there isn't going to be any more money coming from the Fed. This means last week's miraculous rally probably isn't going to last. If investors are wishing the Fed on Wednesday, October 29, 2014 announces QE5, just know that I think their Federal Reserves' hands are tied. After engaging in quantitative easing for two solid years, the Federal Reserve would totally destroy any credibility they have left, if they start QE-ing again.
Due to all these monopoly money printing QE programs, the U.S. government debt is reaching $18 trillion. Even more incredible than the debt owed right now is what is due in the future, which are those unfunded liabilities that come to an astonishing $116. Trillion. How in the world can we pay off the debt when we don't have the real money to do it? And adding insult to injury, the Social Security Administration released a wage statistic study last week for 2013 stating that 50 percent of all American workers made less than $28,031, and 39 percent of all American workers made less than $20,000 annually. So, not only is this more evidence of the declining quality of jobs and life in the country, but with the current debt level, approximately $18 trillion, it would take more than the 400 million working years at this average wage to pay it off. Which means that it's virtually impossible for any and every American man, woman and child in the United States to put in that kind of time, or even overtime to pay off the debt, now that the Federal Reserve has piled on all of our names. The reality is we're no better off than when we started QE1 back in December of 2008.
In my opinion, no news from the Fed on Wednesday would actually be great news. Maybe we can get back to normalcy and maybe it won't be the greatest investment market, but at least we'll develop smarter rules and regulations and new fiscal policy that would help grow the market in a healthy, normal, free market way. Americans need to start taking control of their own destiny and it's something that really came home last week to me because I just believe that these policies are destroying us and not helping us. People need to speak up. We shouldn't allow this broken economic system to subjugate us, it needs to be anchored to the laissez faire foundation that in the past made America the greatest economic power in the world.
All market data references are sourced to Bloomberg terminal database.
Bennett Group Financial Services LLC, based in Washington, D.C., is a comprehensive financial services firm committed to providing opportunities to clients’ as they seek long-term financial success. Its customized programs are designed with the potential to help grow, lower overall risk and conserve client assets by delivering a high level of personalized service and skill.
For more information, call 866-286-2268 or visit http://www.bennettgroupfinancial.com
Securities offered through Western International Securities Inc. (WIS), member FINRA/SIPC. BGFS and WIS are separate and unaffiliated ent ities.
About Dawn Bennett
Dawn Bennett is CEO and Founder of Bennett Group Financial Services. She hosts a national radio program on called Financial Myth Busting http://www.financialmythbusting.com
She discusses educational topics and events in the financial news, along with her thoughts on the economy, financial markets, investments, and more with her live guests, who have included Rock Legend Ted Nugent, as well as Steve Forbes and Grover Norquist. Listeners can call 855-884-DAWN as well as take podcasts on the road and forums for interaction.
The show is a great complement to Dawn’s monthly investing seminars that take place at Tysons Corner in McLean, VA, where she discusses investing.
She can be reached on Twitter @ DawnBennett
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