- Written by Marc Courtenay
- Saturday, 12 May 2012
Are the stock market and the precious metals market ready to take-off like a rocket launch? The answer may be "YES", if Ben Bernanke and the Federal Reserve launch another sufficient round of "Quantitative Easing", a.k.a. "QE3".
Many investors want to know when this will happen, if it happens at all. Previous years' versions of QE occured after a series of frightening economic and market events, most of which were seismic and would have led to western economies sliding backwards into a recession or worse.
Markets apparently are repeating the downturns of 2010 and 2011, and it is time to search for safety, according to Gluskin Sheff's David Rosenberg in an interview with James Mackintosh, FT investment editor. That could mean gold eventually reaching $3,000 an ounce and the S&P 500 moving up perhaps another 10%.
What if QE3 doesn't happen or happens too late. Look what happened in China this very day. According to a Reuters report , " China's central bank cut the amount of cash that banks must hold as reserves on Saturday, freeing an estimated 400 billion yuan ($63.5 billion) for lending to head-off the risk of a sudden slowdown in the world's second-largest economy."
Yet some are saying it's too little and too late. A prominent Chinese economist had the following reaction:
"The central bank should have cut RRR after Q1 data. It has missed the best timing," Dong Xian'an, chief economist at Peking First Advisory in Beijing, told Reuters.
"A cut today will have a much discounted impact. So the Chinese economy will become more vulnerable to global weakness and the slowing Chinese economy will in turn have a bigger negative impact on global recovery. Uncertainties in the global and Chinese economy are rising," he said.
Getting back to the interview with David Rosenberg, one should listen carefully to what he says and the inherent risks that he's referring to. There's the best-case-scenario and the worst-case-scenario.
This 6:21 video interview was posted over at the Financial Times website on Tuesday May 8th, and it is one of the most telling economic insights of the entire week.The link is here.
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