As summer nears, carnivals travel the country. One of the attractions is a "fun house," often with a hall of mirrors that distorts images and causes confusion. Right now, QE2 (quantitative easing) is causing distortions in the market.
As is often the case, the straight line analysis is only sometimes useful, as players try to guess what others are doing. With the purchase of $700 billion in Treasury bonds and notes winding down, many believe that interest rates are going to rise. However, if enough players are positioning that way, the second order impact may be something different.
Some believe that QE2 has been what has been propping up the stock and commodity markets, and when it ends, those markets will turn lower. It may play out that way, but again, in the Hall of Mirrors, not all is as it seems.
I have a few modest positions and a lot of dry powder. I don't particularly care for the distortions of the Hall of Mirrors, the in-person carnival kind, or the financial market Fed QE2 kind.
No comments:
Post a Comment