April 15, 2013

Monetary easing has lost its effect and will see a market correction


Continued massive monetary easing in the U.S. has lost much of its overall marginal impact- there is still little credit growth. With "QE Infinity" no longer producing a tangible influence on the real economy, more easing is much like a flute without holes that cannot be played or a doughnut without holes.

While many are certain that continued liquidity will feed a steady market climb into 2014, sooner than later, there will likely be an "aha moment," a moment in time when the aggressive monetary policies are recognized as not only impotent and ineffective but as likely having adverse unintended consequences (such as producing currency wars).

At that point in time, natural price discovery will be reintroduced into the capital markets, and stocks and bonds will retreat back closer to intrinsic or fair market values, which I view as well below current levels.

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