The Day QE2 Ended
by Bill Bonner
Americans had something to celebrate this Independence Day. QE2 – the Feds’ $600 billion money-printing program – ended on Friday. And guess what? The world didn’t end with it.
Instead, the stock market gave a loud “yahoo!” The Dow rose 168 points. If QE2 is going to be the death of the US economy, the stock market doesn’t see it.
Not that stock market investors always have 20/20 vision. These were the same people who were buying Lehman Bros. and mortgage lenders stock just before the company collapsed.
So, we’re not saying that today’s prices will necessarily be the same as tomorrow’s. The market may know the price of everything at every moment. But it doesn’t know the value. So, as it discovers value, it changes its mind about the price.
Still, we find it mildly disturbing that the Fed can cut off a $100 million-a-month buying program without upsetting investors’ sangfroid. It doesn’t make us wonder about the Fed…but about investors. What’s wrong with them?
But since it was a national holiday, we decided not to worry about it.