I've been waiting for the end of June for at least 8 months. That is when the FED runs out of free money (permanent open market operations, 600 billion) to give the primary dealers and banks. At that point, the end of June, somebody is going to have to buy equities and buy our trillions of refinanced debt. Just to keep our markets afloat.
So just who is gonna buy a stock market that is 5000 points too high already and who is going to buy our treasury debt?
Could it be a glowing Japan with their 200% debt levels? Will it be the UK and their austerity and debt levels? Will it be a retracting China who wants the Yuan to be the reserve currency? Answer- None of the above. Nobody with half a brain would buy the debt of a bankrupt country that is yielding a whopping 3%. Especially when most of the countries that generally buy that debt are as bankrupt as we are. The two countries with relatively strong economies, India and China, really don't have much incentive to help us out.
The "economists" and Ben Bernanke say our economy can float on it's own. Bet me. Here's another deep thinker...drinking the FED's kool aid. I just have to embed this snip, so I can remember this JP Morgan forecaster in a few months when they roll out QE3 and silver ratchets up to 75 bucks an oz.
Our answer is: no. We think it is very, very unlikely. In a nutshell, we don't think the inflation or inflation expectations data are near the point where the Fed would consider further large-scale asset purchases, and even if the inflation data were to start to move in that direction the potential political fall-out is so great that the Fed would be extremely reluctant to purchase more assets.
Get a load of that last line. Purchase assets. That's rich.