Many feel that stimulus (QE2) has driven the stock market. When the original stimulus plan ended in the Spring of 2010, the DOW had a pullback of about $1000. QE2 was then announced and the market picked back up. Many believe when QE2 ends the market will experience another pullback. If I could ask that you make the assumption that the stock market will pull back as we reach the end of QE2 (that QE2 is not extended, no QE3 etc.), does silver and gold still look good to you? What other investment do you like in a market downturn?
QE3 is all but certain for the second half of 2011. What it's called and whether it's offically announced is another matter altogether. You are correct that QE2 has aided the U.S. equity markets by pouring "new" money into the system through the purchase of U.S. Treasuries at very low rates. I still like silver even at $35 and fully believe silver will hit $50 within 18 months. Gold doesn't have the industrial applications that silver does but I still see it hitting $2,000 within 2 years. Just my 2 cents.
The market wasn't experiencing a pull back. It was forming the second shoulder of a head and shoulders bear market. This is usually the pattern it takes right before it collapses. I think when QEII ends, either the fed will start QEIII, or the market will collapse. Truth is, nobody but the FED wants to buy U.S. Govt. debt. As is, the FED is now buying 70% or U.S. debt. When QEII stops, who will pick up the slack???
I think the only reason the stock market is up is because the dollar is dropping due to excess liquidity. It stands to reason to me that stocks jump or drop a little bit extra on the prospect of QE or not, because it is an indication of whether the dollar will fall or rise which has an inverse relationship to stocks. Many people, especially savvy investors who are paid to do so, know the impact of such things and invest accordingly based on the news, but it's the actions that create the news that have the most impact imo. Should QE2 be the end of the road, and the economy picks up then I might do some profit taking, but not a sizeable portion of my PM investment. Although I may be in the minority in that I am not in this for the profits, but rather for security. The way things are going I am shorting the prospect of a rosy scenario, but cautiously optimistic nonetheless. I am long on PM's and staying away from bonds and fiat money unless we pitch a no hitter from here out. If stocks are down too then I suppose I would look to specific companies' stocks that provide services that are required whether or not people can afford them, such as those that provide equipment or software for healthcare, government/defense, and banking. I wouldn't personally invest in JPM or Chase, but considering their track record it's hard to bet against them.
Marc Faber had an interesting article this morning regarding a precipitous pullback (due to Japan disaster) in the market and the Fed's reaction with more stimulus. DOW is down 240 points in pre-open this morning. Here's Marc's article: http://www.cnbc.com/id/42085935 Larry Meyer, former Fed governor, gave an interview this morning where he basically said that all options are on the table. BTW Larry Meyer is usually very "pro" Ben Bernanke and current Fed policy. Whether you feel continued accommodation from the Fed is good or bad it will have an impact on the market. Regards, Bluesboy65
