Graham Summers

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dmger14's picture
dmger14
Status: Bronze Member (Offline)
Joined: Dec 7 2011
Posts: 83
Graham Summers

Graham is saying there will be no QE3.  He says that the stock market, gas and food prices are already high.  In addition, he says that everytime the fed enacted QE, interest rates have RISEN and that a QE3 announcement would implode the bond market, sending interest rates through the ceiling.  He also says that banks need treasuries because they are the senior most assets with which banks make trades. 

He has been right about no QE3 for the past many months people have thought the fed would by now have embarked on it.  I would like to discuss whether his arguments are sound going forward.  First of all, isn't cash just as senior as bonds on bank balance sheets?  If the fed buys debt, the banks get cash for the bonds they sell, and I want to know why it is better for them to have bonds than cash as Graham asserts.  Also, seems to me with all the debt we need to roll over and new issuances, if the fed does not monetize the debt (the fed bought 61% of treasuries last year), interest rates will have to go up anyway to induce investment into all these new issuances.  I realize that the fed knows that mere TALK about QE3 or loosening language in its direction can stabilize markets for a time until the market realizes this and takes the fed word with a grain of salt, but what are your thoughts.   Whether we have QE3 or not can make a big difference in prospects for the stock market, bonds, and perhaps precious metals, so having a good educated guess is helpful to us all.

dmger14's picture
dmger14
Status: Bronze Member (Offline)
Joined: Dec 7 2011
Posts: 83
BTW, Graham pointed out

BTW, Graham pointed out public statements made by Bernanke about the limitations of the fed buying treasuries, specifically Ben noting that if the fed bought too many treasuries and agency bonds, it wouldn't be good for the markets.  Graham thinks this goes to the issue of banks needing treasuries to make trades against, but to be clear, Graham has said many times in the past that the fed would initiate QE3 if there is a crisis.

Clearly, the fed could simply buy new treaury issuances, which would be a quick buy/sell of banks as these treasurires are issued.  Without QE3, seems to me the stock market will get HAMMERED.  Stocks are pricing in QE3 at least to some extent, and clearly cannot be pricing in the fiscall cliff actually happening. 

 

 

 

Base821's picture
Base821
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Joined: Mar 11 2012
Posts: 4
This is a short term read

I think that Graham was saying that, at this point in time, given the uncoming election, that QE3 wont happen, that the market is high enough such that it will be a political liability for Obama if the Fed to executes such a move given the purported stability of the market at this time.  

There is little doubt that, eventually they will do this.

Do any of you subscribe to Grahams Private Wealth Advisor?  I have been consiering it and would love some feedback on your experiences.  Is it worth it?  It is not real cheap at $300, but of course price is not necessarily indicitive of value.

Thanks!

Base

 

 

 

dmger14's picture
dmger14
Status: Bronze Member (Offline)
Joined: Dec 7 2011
Posts: 83
I do not subscribe to his

I do not subscribe to his Wealth Advisor.

I agree with you that Graham does not rule it out, and that it will eventually come, especially since someone needs to buy our treasuries and China is cutting back.  I find very interesting recent criticisms of Graham, saying that QE is ongoing via dollar swaps, etc. and that Graham's view of "No QE3" is just semantics.  Jim Rogers just said that the fed is doing stealth QE.  Given the flack it gt over the past few QEs, and also the information finally FORCED out using FOIA that the fed spent $16 trillion in bailouts during the financial crisis, I wouldn't doubt it for a second.  So the bottom line is whether an official QE3 is announced or not may not matter because QE is ongoing in stealth mode.  IDK, maybe this is why the stock market is so high right now???

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