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Bear Case for Stocks in ‘Dangerous, Untested’ QE3


Amid a bullish market climate, the Federal Reserve has created bearish elements that will send stocks lower, Robert Rodriguez of FPA Funds told CNBC on Tuesday.

On “Fast Money,” Rodriguez had harsh words for QE3: “It’s excessive, it’s dangerous and it’s untested — and it will lead to unintended consequences, this open-end policy of the Federal Reserve.”

Those consequences, he added, were stealthy and dangerous.

“I call them cancers. Very much like prior to the last credit crisis. There were cancers developing in various areas of the credit market that were a function of unsound monetary policy in ’03, but you didn’t see it for several years. The same thing is happening with the Fed’s QE policy, particularly with this QE3, since it’s forcing investors to make what I would call riskier decisions.

“You are seeing some of these elements, such as discussions, let’s say, on Friday about bond funds, extending and moving out in differences from their benchmarks,” he said. “Or in Europe about money market funds having to move out and go down in credit. And even this morning, San Jose talking about how they’re going to increase alternative investments so as to try and increase the returns in this low-return environment.”

The S&P 500 was at 1,454 at 1:44 p.m. ET.

Trader disclosure: On Sept. 25, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s “Fast Money” were owned by the “Fast Money” traders: Josh Brown is long AAPL; Josh Brown is long WFC; Josh Brown is long GDX; Josh Brown is long GLD; Josh Brown is long XLU; Josh Brown is long TLT; Josh Brown is long XLF; Josh Brown is long WMT; Josh Brown is long TGT; Josh Brown is long SBUX; Josh Brown is long XOM; Mike Murphy is long WFC; Mike Murphy is long TGT; Mike Murphy is long LEN; Mike Murphy is short KBH; Mike Murphy is long TWI; Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long AGU; Guy Adami is long MSFT; Guy Adami is long NUE; Guy Adami is long BTU; Jon Najarian is long call spreads in AKAM; Jon Najarian is long call spreads in FB; Jon Najarian is long call spreads in DHI; Jon Najarian is long call spreads in LEN; Jon Najarian is long call spreads in FIO; Jon Najarian is long CBOE; Jon Najarian is long CME; Jon Najarian is long GLUU; Jon Najarian is long STSI;

For Ken Fisher
Fisher Investments is long INTC
Fisher Investments is long PEP
Fisher Investments is long XOM
Fisher Investments is long SNY
Fisher Investments is long BHP.

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