QE2 (quantitative easing) apologists are already noting that QE2 might be more effective than many think.
Credit Suisse, for example, says QE2 will be more effective than investors realize because:
1) negative US real rates up to 7 years have made government funding arithmetic more favourable;
2) lower real yields have led to record housing affordability and a re-rating of assets;
3) the Fed is likely to buy proportionally more assets from non-banks than in QE1 and this directly helps through the funds flow effect.
QE3 coming — widely believed on the Street. Credit Suisse said the Fed is targeting inflation at 1.5 to 2 percent, which will require GDP growth of at least 4 percent over the next few years. They believe QE will be extended by $500 billion to $700 billion.
The BIG issue: is the long, 10-year bear market in stocks showing any sign of ending? Stifel Nicolaus thinks it might be, saying the period where commodities beating the S&P 500 (alternative investing is popular in secular bear markets) is ending.
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