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The fed is definitely following a weak dollar policy. That's not the same as domestic inflation though. People tend to get confused about this.
Even if it does nothing else, lower interest rates today makes stocks more valuable today in the same way it makes bonds more valuable today: their dividend is more valuable. And of course it's great for companies that are highly leveraged like financials. But that's a pretty minor factor over the long haul for stocks, and swings the other way too.
There seems to be this meme going around that the fed is causing commodity prices to go up dramatically. It's nonsense.
Of course a weaker dollar means higher oil prices, but that's about it, and it's a minor factor when you look at the correlation of commodities prices and the dollar index. The commodities bull has been happening for 10 years, and was well underway long before most Americans had even heard the term "Quantitative Easing".
A loose monetary policy does not suspend the laws of supply and demand for commodities. Same supply. Same demand (out of people wages) = Same price. Speculators can artificially drive it up for a short while, but not for long because unlike other investment classes they have to sell their contracts or take delivery.
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With the recent announcement by the FED to print $600 billion dollars and release them into the system it seems that the FED is determined on destroying the dollar in an attempt to stimulate inflation and get the economy moving again. I heard an interesting projection made today from a guy by the name of Steve Peasley on KDOW predicting that housing prices will inflate as the dollar gets crushed eventually causing housing, stocks and commodities to increase significantly in the next few years. I would like to hear the boards comments as to what effect you think QE2 will have on housing prices in the next 2 to 5 years.
#housing