Will the Federal Reserve Make a Move for QE3?

by NewsyBusiness on Aug 11, 2011

(Image source: Wikimedia Commons)

BY JIM FLINK

ANCHOR AUSTIN KIM
You're watching multisource business video news analysis from Newsy.
Bears.
Bulls.
Bears again.
Schizophrenic markets -- are dominating the headlines.
The Street believes -- QE3 addicts are on the loose -- running with the Bears on Wall Street.

"The Federal Reserve has turned into the ultimate pusher, and quantitative easing is the drug that investors want badly. The question now is whether any good would come of allowing the central bank to continue to enable the markets."
Many analysts believe -- while the Fed didn't offer up QE3 in its statement Tuesday -- there's a complicit wink and nod which says, it's on its way.
Back in June, PIMCO's Bill Gross hinted as much, saying it will be unveiled at the Fed's next meeting at Jackson Hole, Wyoming on August 26th. (Twitter)

Benzinga says, the QE3 handbook has already been handed out -- if you were paying close attention.
"No one knows the size of QE3 yet, but many are speculating it could be an open ended version, having easing go on until the Fed sees fit to end it. It would have to be bigger than QE2, which was $600 billion. Those gains are now gone, and it is painfully obvious the only thing keeping the equity markets afloat is the Fed."

Not everyone is convinced Bernanke and his bunch will make a QE3 announcment at Jackson Hole. On CNBC, Zephyr Management's Jim Awad offers a qualified reason why QE3 isn't coming.

"The question becomes -- are you gonna get further economic instability between now and then. I suspect that if you don't, that he will stay put. That he had his opportunity to say today what he was going to say."

But an analyst tells Bloomberg, with a stagnant economy likely to continue, the Fed may not be able to hold back from QE3 -- because nothing else is projected to work -- in the short term.

"I think the Fed is closer to QE3 than you might think. The Fed is not going to let the 10 year Treasury yield linger so close to 2 percent. If that doesn't turn around soon, I think you will see QE3."

Question is -- what's better. Business Insider says -- everyone -- from the Fed to the Street is watching -- waiting -- reading the tea leaves.

"In a low-inflation world where all kinds of bad mojo is happening...you probably want to be in the safe stuff, like bonds, Swiss francs, and gold. But in a low-inflation world where the struggling classes continue to be ignored, corporate profits roll on, the powers that be keep their crap together (barely), and the world mostly muddles through with zero rates as far as the eye can see, you may still want to own... stocks. Just sayin'..."

Transcript by Newsy

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