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QE Interim Scorecard (by Ultra Trading)

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So let's see how QE is doing so far.  The goal of QE was to drive down yields thus inflating the economy and stirring job growth.  The bar has moved though as certain goals saw the opposite happen so the next bar was to increase the wealth effect through rising asset prices.  It should be noted housing represents a larger portion of one's wealth versus stocks.


This is three months in a row now of huge misses.  Even in the face of reports showing a growing manufacturing and services sector, job growth is contracting.  I say contracting because it cannot even keep up with the 150,000 jobs needed to match population growth.  QE has been in place for almost two years now.  Other than census, there has been zero job growth.




Yields have risen dramatically since QE2 was hinted at and then announced.  The Fed spun rising rates as a positive that the economy was expanding so fast that the bond market was forecasting rising rates.  If that is the case then why has today's horrid jobs report caused yields to spike even higher and in many instances take out key support levels.  The other component of yields is the damage it is doing to housing.  There is a direct relationship with the 10 year treasury and home prices and in this distressed market, housing needs all the help it can get.  The impacts on wealth affect are indeed negative.




The dollar has indeed tanked and has resulted in higher exports for US manufacturers.  It has also increased input costs which is simply going to choke off an economy that cannot afford higher prices. Employers will manage the bottom line and one way to do it is further layoffs and delays on any immediate expansion.  So the vicious cycle is this. Lower corporate profits due to higher input costs and lower demand results in higher layoffs and thus even lower demand.



The Fed has failed miserably so far.  Even the Russell 2000 as Banana Ben has hyped of late has begun to rollover.

Submitted by Ultra Trading.  If you would like to follow my blog, please visit - Ultra Trading