Conjecture on the End Of QE2

[fusscharles]

SO, end of monatizing the debt ends in a month. I figure we will see HUGE volatility leading, and subsequent to it. So I am doing a couple of buys based on a theory that we will see swings that take us down below the 50 day - I would look to buy a large batch at $32, then again wait and see if it ever falls to $29 for a 2nd buying.

My theory is that we will see a huge dollar rally, plus mid-summer metals buying "softness". Oil will go down to the low 90's and silver will follow. Gold will stay in the low 1500's. Once the recent slack in the economy is reversed, and we see some "real" upward push in our GDP numbers, I would think silver prices will move to the updside (of $40).


What does anyone else think?

[beauanderos]

Monetizing will not end, they will just accomplish it in some less obvious fashion. No one is buying our debt anymore.

[Country]

I see the summer doldrums upon us already in PMs. Seasonality has shown that PMs will not make much progress until August. While the FED has promoted the idea of the end of QE2, who is going to buy the treasury bonds (the FED has been buying 85% of these recently)? If interest rates rise, the economy could falter more than it has been. IMHO, QE2 may end, but there will be some government operation to take its place soon thereafter. My guess is that GOLD will be the chosen PM soon, as they frequently take turns leading the rise higher. SILVER should appreciate, but GOLD might be seen as the "safe" PM to own on the next run up.

[Market Harmony]

Monetizing will not end, they will just accomplish it in some less obvious fashion. No one is buying our debt anymore.

new name, same "solution" Name of the game began as Bush 2's "stimulus package"

[hejira11]

Monetizing will not end, they will just accomplish it in some less obvious fashion. No one is buying our debt anymore.

Agreed. They will find improved means to un-improved ends.

[beauanderos]

Once the recent slack in the economy is reversed, and we see some "real" upward push in our GDP numbers

The only push the GDP receives is with a phony CPI and PPI, complements of hedonics and excluding core numbers. If real inflation was reported (ala John Williams shadowstat.com) I really doubt we would see anything but a grinding recession/depression for the next decade.

[fusscharles]

I have a bad feeling I am going against the grain on this board.... There is no real inflation right now. It is transitory..... yes I am a believer in PM and I believe that inflation is CURRENTLY not the real thing. The economy has too much slack, there is no wage growth, I see nothing going up in price except food and fuel. Food prices in the US are not a real indicator of anything- heck the government pays for half our food (subsidizes), how can it indicate anything?! The point I was trying to make, but didn't hit the mark, is that REAL inflation begins when a real upward trend begins. As far as I can see , silver follows that trend. Gold is money, a hedge for uncertianty and a place to park cash when experiencing "soft" economies. Silver to me is not the alternate money that gold is. To me it is 1/4 money, 1/4 hedge of the unknown and 1/2 an industrial product that will only really gain price when we see economic growth on the horizon. I feel it follows oil, not gold. Gold does it's own thing....


So my hypothesis is that gold will ride high for the next 3-6 months. Silver will pick up end of year, cause we will probably start seeing positive GDP in Q3-4. Then next year, with the presidential election, we will see silver go crazy. Some Americans will feel the new dawn is coming (even if isn't) and some will feel the world is ending... but regardless, we will see a ton of movement in the economy pulling from each end.... Animal Spirits, if you will. Now if there is qe III, we will see that $100 silver everyone keeps whispering about.

[brian0918]

Inflation is certainly picking up, and you are wrong about wages being stagnant. It certainly is true for most Americans, but the largest financial institutions - which would have failed if not for bailouts - are still doling out record bonuses, with money printed out of thin air. That will bid up prices.

Also, an increasing number of people are living in their homes mortgage-free, many for several years now, because the financial institutions lending them the money would rather they don't pay than to put another foreclosure on the books and potentially drive down the inflated value of homes. So people who would normally be dumping a LARGE part of their income into mortgage are spending that money elsewhere. That bids prices up. Yet other ways that inflation arises despite lax wages: homeowners leading up to and during the financial crisis who pulled out home equity to cover expenses; government-granted student loans at colleges that are charging 5% more each year since the financial crisis started. All of that money, pulled out of thin air, bids prices up.

And on a global scale, as other countries print money to maintain their peg to the dollar, that foreign money finds its way into circulation, prices are bid up, and the effects of that are eventually felt here in the US through increased prices.

And to say that prices of food and energy are not important is quite absurd. You sound like the Fed Chairman who said that the falling price of an iPad cancels out rising food prices.

[68Camaro]

Charles, you're certainly entitled to your opinion, but sit back and re-evaluate over time. Certainly (and it is amazing to me) the media is full of calming reports that "things are okay, getting better". But is it? Really? Nope. I spend most of my disposable income on food and energy. Inflation is real, and getting worse. And why should that be surprising? It shouldn't be.

Energy of course does go up and down in a very volatile fashion, and has a huge knock-on effect. If it goes down again that will help. But the long-term trend will be up. Printing money is a devaluation of the dollar. Denial of that by the Fed and others is simply a fabrication. They are actually counting on inflation to make it easier to pay off past debt with future cheaper dollars.

[Mossy]

Agreed. They will find improved means to un-improved ends.

Wish I could say you were wrong. New coat of paint on the same old.

[fusscharles]

Camaro, where di you get the idea that I agree with the fed or deny that there is devaluation going on is beyond me.... I agree that we are heading to REAL inflation. It will take us by storm, and it will hold no prisoners.

Brian, I work for a major financial institution- look at capitalization and stock prices of the big 5. Make your call on what "raises" we have seen since 2008. The US' top 3 bank's stock is down to 40% of where they were before the crisis.

What I am saying is that we are seeing "trending" inflation right now. When QE ends, we will see deflation. That is a much bigger problem than anything else, albeit, I am a hands off kind of guy. I do not agree with the fed injecting money, nor do I agree with keynesian economics. It is just what we are living with now, and what we will have to deal with until "something" changes.

For silver to really skyrocket, you need increasing gdp, it brings in the industrial side of metal usage. Coins are not going to bring the prices past $40. Why do you think it went up in the past few months? Because the media and most businesses THOUGHT THE ECONOMY WAS DOING BETTER. Then we see a month of softness due to unemployment numbers, and commodities drop because the media and business are now thinking we are hitting a soft patch.

[68Camaro]

Re-read what you wrote, and guess I missed your point, and maybe I'm still unclear on what it is... That maybe we're headed to deflation? Maybe. I think it's certainly one of the possibilities...