RallyCry (< 20)

QE? Phooey! I want a stronger dollar

August 23, 2011 – Comments (0) | RELATED TICKERS: GOV , T

It's time to try something new. However...

I'm assigning a 80% probability to a new Fed asset purchase program in the next 90 days. When this Fed intervention rumor gets louder, I will sell my equity holdings and move back into cash. I think the market will soon realize (if it hasn't already) that any additional QE will not spur organic growth, will have only temporary effects on rates, and will not restore confidence in capital markets. This reality should lead to another sell off.

The Fed needs to show some resolve and some support for the greenback by staying put. Paper currency is taking more of a beating than a corrupt politician found linging his pockets with Benjamins. (You'll know it is bad for the buck if bribes start getting paid by the troy ounce.}

The best thing for this market is no QE3. I think this would lead to a dollar rally, stable oil prices around $70-$80,  not to mention a consumer that can actually afford food and gas for the first time in several years! A strong dollar serves as an indirect tax break without the debt associated with a $600 billion stimulus program.

The consumer is still 70% of the economy. Take away the stress and uncertainty of high prices and people will have more money to spend. Unfortunately, I'm assigning only a 20% probability to no new Fed asset purchase program in the next 90 days. The Fed is like the overprotective parent who ends up getting in the way and doing more harm than good, even when they mean well. Their worrying and failure to take the training wheels off of this economy has had a negative impact on our psyche. However, as scary as it may be, it's time to ride on our own. If we fall off and get a few more scars, I'd say we'll be tougher and more confident knowing we can dust ourselves off, get back on, and keep moving on our own.

Lastly, the next time I want to hear the word trillion is in the same sentence as the word cut, not in the same srntence as the word spending or its sneaky cousins investment and stimulus.