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Quantitative Easing

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Stock Market Faces Critical Test This Week

By , Contributing Writer, Money Morning -

Stocks rose gently like heat waves off a radiator over the past week, as traders guessed, assessed and processed the results of the midterm elections and the Federal Reserve's decision to try to light a fire under the U.S. economy by buying a $75-billion pile of fresh, new Treasury bonds every 30 days for the next eight months.

The major indexes rose 3.5% amid a set of sessions when banks finally found footing, as they were the best performing group, up 1%. Laggards were industrials and utilities, ending flat. Breadth was positive, favoring advancers by 2-1. And the number of new highs swelled to 1,200 while new lows also rose, to 80.

Click here to read why the market is at a critical juncture...

What to Expect from the Federal Reserve's Next Round of Quantitative Easing

By , Contributing Writer, Money Morning -

The U.S. Federal Reserve today (Wednesday) is all but certain to announce a second round of quantitative easing - "QE2."

Most analysts believe the Fed will pledge to buy another $500 billion in U.S. Treasuries, but I think it will go even further. My expectation is that $500 billion in Treasury purchases over six months will be just a first step, and that the full amount contemplated - as much as $2 trillion - is much larger than consensus.

This view is based on an analysis by Goldman Sachs Group Inc. (NYSE: GS) chief domestic economist Jan Hatzius that suggests current interest rates, at 0% to 0.25%, are 700 basis points too high. In plain English, the Goldman analysis suggests that interest rates would have to be -7% to achieve the Fed's goals.

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Slow GDP Growth Sets Stage for Fed's Next Round of Quantitative Easing

By , Contributing Writer, Money Morning -

The U.S. economy continued to struggle to grow in the third quarter, most likely giving government officials enough cover to pump more liquidity into the financial system to stimulate hiring.

Gross domestic product (GDP), the value of all goods and services produced, increased by 2% in the third quarter, the Commerce Department reported Friday. Economists polled by Dow Jones Newswires were expecting GDP to rise by 2.1% in the July to September period, The Wall Street Journal reported.

The gain was slightly more than the second quarter's 1.7% growth but not enough to revive a moribund job market, according to most economists.

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As QE2 Looms, Is the Fed Focusing on the Wrong Things?

By , Global Investing Specialist, Money Morning -

U.S. Federal Reserve Chairman Ben S. Bernanke is looking forward to 1932.

That's not a misprint. Actually, Bernanke is looking forward to a point when the challenges facing today's U.S. economy mirror the problems of that particular Great Depression-era year. And he wants that to happen for a very simple reason.

He knows how to solve those problems.

Unfortunately, "1932" isn't likely to arrive. And the preparations the Fed is making in the meantime are likely to deepen the United States' economic woes.

Let me show you what I mean...

To see where the central bank has gone wrong, please read on...

QE2: How New Quantitative Easing Will Launch Emerging-Market Stocks

By , Global Investing Specialist, Money Morning -

 In Wall Street circles, it's known as "QE2" - for "Quantitative Easing - Round 2."

The U.S. Federal Reserve and the Bank of England (BOE) are moving rapidly towards it, and the Bank of Japan (BOJ) has pledged to enact it.

That Bank of Japan pledge ignited a $23.50 spike in the price of gold on Tuesday. But that's nothing compared to what would happen after a Fed move. An additional easing by the U.S. central bank would cause gold and commodity prices to spike - and emerging-market stock markets to soar.

We should be prepared for this eventuality.

To see how you can profit from "QE2," please read on...

It's the Best Investment in North America – and It Isn't the United States

By , Global Investing Specialist, Money Morning -

The U.S. stock market has run up magnificently in the last six months. The U.S. economy has begun to recover, but its performance has fallen short of expectations. And with good reason. The United States has a bigger and more-troubled financial sector than most countries. It also has a bigger overhang from the housing bubble, […]

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Fed Says Economy Picks Up But Keeps Lid on Interest Rates

By , Contributing Writer, Money Morning -

The Federal Reserve Open Market Committee (FOMC) today (Wednesday) said that the economy has improved, but kept the benchmark interest rate target at all-time lows, indicating that it is determined to nurture a budding economic recovery by providing liquidity to the financial sector. Economic activity is "picking up," the Fed statement said. The statement was […]

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