qe3 fed

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QE3 Not Required: Three Stocks Thriving Without the Fed

By , Contributing Writer, Money Morning -

When U.S. Federal Reserve Chairman Ben Bernanke opened the floodgates of easy money with quantitative easing (QE3), Wall Street staged a party.

But even though the market quickly jumped to five-year highs, stocks fizzled shortly thereafter.

And that leaves investors wondering whether this market has staying power.

"The question now is if investors feel brave enough to continue to buy stocks at such elevated levels," Fawad Razaqzada, market strategist at GFT Markets wrote in a note to investors. Investors looking for a safer route should focus on companies that can thrive on their own merits -- even without an intoxicating shot of QE3.

Companies that make products we have to have - the necessities of life, in other words -- tend to be more resistant to market ups and downs.

Let's take a look at three companies that have delivered steady, reliable returns for decades -- with or without QE1, QE2, QE3 or, someday, QE99.

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The QE3 Dangers Bernanke Isn’t Telling You About

By , Contributing Writer, Money Morning -

Hoping the third time is the charm, the U.S. Federal Reserve voted on Sept. 13 to launch another bond-buying program, QE3.

Equity and commodity markets cheered the Fed's move. Stocks rallied and analysts raised precious metals price forecasts.

QE3 differs from the first two rounds in that it is an aggressive open-ended purchase program of $40 billion per month of mortgage-backed securities. The buying is slated to continue until we reach substantial and sustained improvement in the U.S. economy, which won't be a short-term achievement.

The program aims to lower long-term interest rates, stoke consumer demand and bring down the elevated unemployment rate.

But some opponents think the latest stimulus measure from Fed Chairman Ben Bernanke will fail to achieve any of that.

In fact, the QE3 doubters have a lot to say - and anyone with money in the markets right now should pay attention to what could happen.

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Forget the Punch Bowl, With QE3 Ben's Party is Open Bar

By , Money Morning -

Everything changed on September 13. It's the day Ben Bernanke promised not to take away the punch bowl.

Last Thursday, Helicopter Ben announced that the Fed would start buying $40 billion in mortgage-backed securities -- for as long as it takes. He also announced the Fed will keep rates between 0-0.25%, until mid-2015.

The goal is to keep supporting the mortgage bond market until the employment level improves "sufficiently."

But given that the last several rounds of multi-hundred billion dollar stimulus didn't accomplish that goal, it's hard to see why they'd expect this time to be any different.

Maybe it's just because Paul Krugman was right: They didn't spend enough the first two times (sarcasm intended). Or then again, maybe that's not really their goal...

Consider this: At Jackson Hole just a few weeks ago Bernanke said that, historically, there has only been limited experience with quantitative easing. Therefore central banks, including the Fed, "have been in the process of learning by doing."

Excuse me, but are you freaking kidding me?...

Did Ben skip all his history classes? Has he ever heard of the demise of Rome or Weimar Germany?

More recently, even Argentina and Zimbabwe have had plenty of experience with quantitative easing. Their zealous over-printing led to major devaluation and/or outright currency collapse.

Couldn't Bernanke have checked in with Cristina Kirchner or Robert Mugabe?

The only real difference, and I'll admit it's a substantial one, is that the U.S. dollar is the reserve currency for the world's central banks. But that won't change the outcome.

Instead it may just delay the day of reckoning. In the meantime, it's very likely going to make the situation much, much worse.

So what's the Fed really up to?

Well, here's what I think...

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QE3 Delivers Fresh Ammo for Both Romney and Obama

By , Associate Editor, Money Morning • @DavidGZeiler -

U.S. Federal Reserve Chairman Ben Bernanke never intended his latest stimulus program, QE3, to become an issue in the 2012 presidential election, but he had to know what would happen.

"We have tried very, very hard, and I think we've been successful...to be nonpartisan and apolitical," Bernanke said at a news conference Thursday after the official Fed announcement of QE3. "We make our decisions based entirely on the state of the economy....So we just don't take those [political] factors into account. And we think that's the best way to maintain our independence and maintain the trust of the public."

In case you missed it, the Fed's third round of quantitative easing entails the purchase of $40 billion of mortgage-backed securities each month until unemployment shows a marked improvement.

In other words, for as long as it takes.

But with QE3 arriving less than 60 days before a bitterly contested presidential election, the Fed move was bound to get caught up in the campaign.

Both sides reacted immediately, with Republicans criticizing QE3 as unnecessary while Democrats applauded.

A few Republicans even accused Bernanke of timing QE3 intentionally to boost President Obama's re-election chances.

For the record, Bernanke is himself a Republican, appointed chairman of the Federal Reserve by President George W. Bush in 2006 and re-appointed by President Obama in 2010.

But with the Fed becoming a GOP bogeyman in recent years (thanks largely to the attacks from Rep. Ron Paul, R-TX), QE3 was bound to become weaponized in this year's increasingly acrimonious campaign.

Don't be fooled when each political party throws out the following QE3-fueled lines to get your vote.

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How QE3 – Like QE1 and QE2 – Will Trigger Inflation

By , Money Morning -

The traditional safe haven assets of gold (NYSE: GLD) and silver (NYSE: SLV) have surged in price due to the announcement of the latest round of quantitative easing, QE3 - but those aren't the only assets QE3 will push higher.

While QE3 might seem harmless to U.S. consumers, it is present every time they gas up their cars or buy food at the grocery store.

In fact, all three rounds of quantitative easing have led to higher priced commodities.

Whether you realize it or not, QE3 - same as the stimulus programs before it - is adding greatly to the costs of everyday life. QE3 is directly leading to higher prices for oil, food and the cost of imported goods.

Over time, that results in a tremendous consumer expense in all product and service categories.

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Jim Rogers On QE3, Gold, Silver and Oil

By , Contributing Writer, Money Morning -

The U.S. Federal Reserve is ready to launch a third round of quantitative easing, dubbed QE3 or QE Forever - but legendary investor Jim Rogers is shaking his head.

In fact, Rogers said repeating the same program the Fed has already attempted will make policymakers "look like fools again."

In an interview with CNBC before the Fed's announcement, the chairman of Rogers Holdings said he was skeptical that additional stimulus measures could have any meaningful effect on the U.S. economy. He added that despite his reservations, he expected the Fed to unveil QE3.

The iconic financier also lashed out at the new developments in Europe, including a move from Germany last week to funnel taxpayer cash into the European Central Bank's OMT program, their own version of quantitative easing. Rogers maintained they are not addressing the root of the problems plaguing the Eurozone area.

On Europe's move to implement a euro version of QE, Rogers said it affords the Western world "unanimity towards mutual destruction."

Any relief will be temporary, warned Rogers.

"We're all going to pay a horrible price for this in a year or two or three," he said.

As for why the Fed will continue its ineffective stance of zero to 0.25% interest rates through at least mid-2015, and the tossing good money after bad, Rogers advised the reasons are simple.

It's an election year and "Mr. Bernanke wants to keep his job."

That's why Rogers is getting defensive with commodities.

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QE3 Becomes QE Forever

By , Contributing Writer, Money Morning -

Welcome to unlimited quantitative easing, or QE Forever.

The U.S. Federal Reserve goosed equities, Treasury yields, gold, silver, oil, platinum, palladium and investor sentiment on Thursday when it announced additional stimulus to spur economic growth.

The central bank said it will continue to buy mortgage-related debt and other securities until the job market shows significant signs of improvement so long as inflation remains tame.

"The market got what it wanted. Stocks immediately shot up," James Meyer, chief investment officer at Tower Bridge Advisers told Reuters.

In fact, the markets got more than expected.

As part of the Fed's new scheme, a marked difference from the first two rounds of QE, it will buy $40 billion of mortgage debt per month. Additionally, the Fed reiterated its stance of keeping interest rates at historic low levels, extending the time frame out until at least the middle of 2015.

"This is definitely a significant shift in FOMC policy," Julia Coronado, chief economist for North America at BNP Paribas in New York and a former Fed economist told Bloomberg News.

Plus, the Fed said it would continue Operation Twist, its action to bring down long-term interest rates.

Collectively, the Fed moves will flood some $85 billion a month into the struggling U.S. economy for the rest of 2012.

The Fed has always set a determined amount of Fed purchases. This time, however, it let America know that easing will endure and no tightening will occur until confidence recovers.

That's why QE3 is a game-changing move for the U.S. economy.

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How to Play the QE3 Rally

By , Money Morning -

QE3 was finally announced by the U.S. Federal Reserve after today's Federal Open Market Committee (FOMC) meeting.

Federal Reserve Chairman Ben Bernanke announced that the Fed will launch a new bond-buying program to purchase $40 billion in mortgage-backed securities each month. Interest rates will be kept at 0% through mid-2015, six months longer than originally planned.

Together with the rest of the remainder of the Operation Twist program, the Fed will be buying $85 billion in bonds for the rest of 2012. The new bond purchases will start tomorrow (Friday).

Bernanke and the FOMC decided in an 11-1 vote to use unconventional monetary policies once again to bring down unemployment that has been stuck above 8% for 43 months and to boost an economy that grew at a lethargic 1.7% rate in the second quarter.

But this new program, compared to previous rounds of easing, has a new twist.

QE3 is an open-ended program to buy bonds until the economy improves. The Fed said in its statement earlier today that if the labor market does not improve it will continue purchases and undertake additional measures if needed.

Now that QE3 is here, will this new measure actually boost the economy and spur job growth?

Catherine Mann, a Brandeis professor and former Federal Reserve economist doesn't think so.

"The Fed continues to want the economy to grow faster and specifically, to grow more jobs, but the ability of QE to do that is extraordinarily limited," she told CNN. "We know that QE reduced interest rates, but we also know that has not led to more construction, more mortgages, more business investment, or more lending. Since it hasn't done any of that, it probably hasn't created jobs either."

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Fed Meeting Today: Are You Ready for QE3?

By , Money Morning -

Investors have prepared for the Federal Open Market Committee (FOMC) meeting today and tomorrow to end with the announcement of a third round of quantitative easing (QE3) - and that's a good bet to make.

Today's Fed meeting will likely end with more of the same information we've been hearing for months from U.S. Federal Reserve Chairman Ben Bernanke. It's been a year and a half since Bernanke first announced that short-term interest rates would remain near zero "for an extended period." That language will likely stay the same tomorrow, and the policy timelines could be drawn out even longer.

There is also no doubt that QE3 or some other meaningful economic stimulus measure is on its way.

Maury Harris, an analyst with UBS, declared in a recent note to clients that, "We now anticipate an announcement of another round of quantitative easing at the FOMC meeting on September 13th. We expect the easing will take the form of a six-month program of at least $500 billion, primarily focused on Treasuries."

Harris also added that, "We also expect the FOMC extends their rate guidance into 2015."

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Could QE3 Really Do Less for the Economy Than the iPhone 5?

By , Money Morning -

Investors are eagerly waiting to hear if U.S. Federal Reserve Chairman Ben Bernanke will announce QE3 this week. Bernanke speaks Thursday at the conclusion of the two-day Federal Open Market Committee (FOMC) meeting and many expect him to announce some form of stimulus to revive the struggling U.S. economy.

But there's another huge event scheduled this week, one that could provide a tool other than printing money for boosting U.S. gross domestic product (GDP).

Believe it or not, analysts at JPMorgan Chase & Co. (NSYE: JPM) estimate that the Apple iPhone 5, expected to be unveiled tomorrow (Wednesday) afternoon and on sale by the end of this month, will raise GDP by 0.5% in the fourth quarter of this year.

Money Morning Chief Investment Strategist Keith Fitz-Gerald appeared on Fox Business' "Varney & Co." program Tuesday morning to discuss the possibility of this iPhone effect and what it implies.

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QE3 Risks: Why this Harvard Economist Fears More Stimulus

By , Contributing Writer, Money Morning -

High U.S. unemployment and slowing economic growth have stoked hopes of a third round of quantitative easing, or QE3, from the U.S. Federal Reserve. Fed Chairman Ben Bernanke hinted that more was on the way - although failed to indicate when - in a speech Friday at the Jackson Hole, WY, economic symposium.

Bernanke repeated the Fed's recent stance that current economic conditions are still "obviously far from satisfactory" and more help would be coming "as needed."

Interest rates remain near zero, but the Fed maintains that it still has plenty of ammo in its arsenal to boost the economy. The Fed apparently doesn't want to do too little now while the economy faces high unemployment and some inflationary pressure.

On the other hand, doing too much could - if Fed policies interfere with Congress' ability to act down the road -lead to a backlash against the Fed's power.

And the farther the Fed goes with monetary stimulus measures, the deeper that problem becomes.

That's why Harvard economist Martin Feldstein is afraid of QE3. He thinks adding to the billions of dollars already committed to quantitative easing programs will hurt us more than it helps.

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QE3 Still on Table, Bernanke Says in Jackson Hole Speech

By , Associate Editor, Money Morning • @DavidGZeiler -

The Federal Reserve is looking at more action to prop up the lagging U.S. economy, including a third round of quantitative easing (QE3), Fed Chairman Ben Bernanke said in a speech today (Friday).

Much of the speech, delivered at the Fed's annual retreat at Jackson Hole, WY, made a case for the effectiveness of the central bank's easy-money policies since 2007, including "nontraditional" actions such as QE1, QE2, and Operation Twist.

The Fed chairman said that the stimulus purchases "have provided meaningful support to the economic recovery while mitigating deflationary risks."

And in a hint to expect more of the same -- namely, QE3 -- Bernanke said that the costs of such policies, "appear manageable, implying that we should not rule out the further use of such policies if economic conditions warrant."

Bernanke also voiced concern over the sluggish economic recovery, and in particular the "painfully slow" improvement of the U.S. unemployment rate, which has changed little in 2012.

That's the sort of bad economic news that has pushed the Fed to take action in the past.

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How to Profit from QE3 When the Fed Pulls the Trigger

By , Money Morning -

In one form or another, the U.S. Federal Reserve soon will introduce a third round of quantitative easing (QE3) or a related major economic stimulus program.

A statement from the most recent Federal Open Market Committee (FOMC) meeting of the Federal Reserve reported that, "Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery."

President of the Boston Federal Reserve, Eric Rosengren, called for an open-ended program to allow for the Federal Reserve to buy bonds like it did during Quantitative Easing 2. He pointed to the high unemployment rate as the main reason more stimulus is necessary.

"That calls for a more substantive action than we've taken to date," he said. "We need a pro-growth monetary policy," adding that the current state of the economy is "not sufficient."

Federal Reserve Chairman Ben Bernanke announced Quantitative Easing 2 at the August 2010 Jackson Hole economic policy summit. It consisted of the central bank buying $700 billion in U.S. Treasury bonds to finance the U.S. budget deficit.

Rosengren now wants the Federal Reserve to have an unlimited authority in that area, held in check only by the reaction of market forces.

Those market forces reacted very strongly to QE2, forcing the U.S. dollar down in value while prices for commodities such as oil, grains, gold and silver soared.

In addition to the commodities price rise, select stocks performed well during QE2 as consumers spent more and emerging markets enjoyed a heavy growth period. These are the companies investors should buy ahead of QE3, which is on its way.

How to Profit from QE3

The most important factor to consider when hunting for stocks to buy ahead of QE3 is a robust dividend framework.

With the Fed keeping interest rates low as it tries to repair the U.S. economy, dividend yield is crucial.

Or, as Money Morning Global Investing Strategist Martin Hutchinson put it, "In Ben Bernanke's rotten world, a few select high-yield investments are practically a necessity these days."

According to investing legend Jack Bogle, founder of the Vanguard Group of mutual funds and creator of the first mutual fund, dividend income has provided more than 40% of the historic total return of a stock.

Besides money in your pocket, dividends represent a commitment of the management to return capital to investors. Dividend income also proves that the company is sound enough to reward its shareholders without hindering the future growth prospects of the business operations.

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Today's FOMC Meeting: We Could Wait Four More Months for Action

By , Money Morning -

The U.S. Federal Reserve continued its wait-and-see stance today (Wednesday) and remained in idle mode when it said and did little at the conclusion of its two-day Federal Open Market Committee (FOMC) meeting.

The central bank decided to leave rates unchanged, reiterated it would leave rates low through at least 2014 (not extending them to 2015 as expected) and did not announce a third round of quantitative easing.

The Fed chiefs did, however, voice that should conditions warrant, they are ready to step in and take aggressive steps to bolster the U.S. economy.

PIMCO's leader Bill Gross told CNBC that "a changing in policy landscape can be expected in a month or so."

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QE3 is on Its Way - Here's How to Prepare

By , Money Morning -

Federal Reserve Chairman Ben Bernanke spoke to the U.S. Senate Tuesday and yesterday (Wednesday) in his two-day biannual meeting with Congress - and failed to make any promise to institute more stimulus measures.

He did leave the door open for the Fed to do something - even if it won't commit to what that will be.

The markets rallied, although investors were disappointed that the Fed chief couldn't deliver a bigger commitment.

But make no mistake - quantitative easing, or QE3, is coming.

That is assured for one simple reason.

The U.S. government can find few buyers for its debt at current low interest rates. And as Bernanke has stated publicly, low interest rates will remain in place until at least 2014.

That means the Fed will have to continue its role of financing the budget deficit of the U.S. government through the inflation of its balance sheet.



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