The Effect of Quantitative Easing on Investment Cycles

By Jack Forehand (@practicalquant) —  “Hindsight gives us the illusion that the world makes sense, even when it doesn’t make sense” — Daniel Kahneman This time is different. If there is one phrase in investing that I have seen consistently lead to bad outcomes, that is it. It is what you heard over and over again in 1999, when investors felt that we were in a new world and the rules of valuation that held up… Read More

Joseph Stiglitz Critiques Post-2008 Financial Policy and Suggests Reform

Drawing on the United Nations’ report World Economic Situation and Prospects 2016, former World Bank chief economist and senior vice-president Joseph E. Stiglitz, now  a professor at Columbia University, writes in The Guardian that “dominant [financial] policies during the post-crisis period . . . have tended to make matters worse.” He observes that “in the US quantitative easing did not boost consumption and investment,” and suggests the failure is partly due to “perverse incentives.” Stiglitz… Read More

Bridgewater’s Dalio Says the “Risk is Asymmetrical on the Downside”

Ray Dalio of Bridgewater Associates explained the long-term debt cycle affecting the market. “The problems at the end of the long-term debt cycle,” he said, “is that it is very hard for the Federal Reserve or central banks to ease monetary policy.” He observed that the effect of quantitative easing is, ultimately, to lower the spread (or return) because it drives asset prices up and lowers the yield so, “for example, you have about a… Read More

Dalio Sees Significant QE Before Significant Rate Hike

Hedge fund guru Ray Dalio says he expects the Federal Reserve to make a significant quantitative easing move before it makes a significant interest rate hike. “To be clear, we are not saying that we don’t believe that there will be a tightening before there is an easing,” Dalio writes in a recent post on his LinkedIn page (h/t MarketWatch). “We are saying that we believe that there will be a big easing before a… Read More

Fisher: QE Can’t End Soon Enough

One of the common themes in the media regarding the stock market in recent years has been that investors are fearful of the Federal Reserve cutting back on its quantitative easing efforts. Top strategist Ken Fisher doesn’t buy that logic. “This is just such rot. Why would they fear rising long-term rates? Higher rates are supply-side monetary stimulus — which is just what the world needs now, after five years of the evil twin, demand-side… Read More

Fisher: End of QE to Boost Banks

Fears continue to hover over big banks, but top strategist Kenneth Fisher says that an end to the Federal Reserve’s quantitative easing policies will actually mean a boost for bank performance. “Banking’s core business is simple: Take in short-term deposits, make long-term loans,” Fisher says in his latest Forbes column, adding that he thinks QE has been a hindrance, not a help, to the economy. “The spread between short- and long-term interest rates pretty well… Read More

Fisher: Like QE2, QE3 is Unnecessary

While murmurs of a potential “QE3” — that is, a third round of quantitative easing by the Federal Reserve — continue to hover over the stock market, Kenneth Fisher says such a plan is unnecessary. “Everyone wants to see slowing growth in Q1 and Q2 as rock solid evidence of recession ahead — instead of normal growth rate volatility,” Fisher writes on “The US economy normally decelerates sometime in the first or second year… Read More