Sunday, April 22, 2012

Recent Hussman Columns

Apr 9:

"Quantitative easing simply does not relieve any constraint that is binding on the economy. Rather, QE is a method by which the Fed hoards longer-duration, higher-yielding securities like U.S. Treasury bonds and replaces them with cash that bears zero interest. At every moment in time, somebody has to hold that paper. The only way for the holder to seek a higher return is to trade it for a more speculative asset, in which case whoever sells the speculative asset then has to hold the cash. The process stops when all speculative assets are finally priced so richly and precariously that the people holding the cash have no further incentive to chase the speculative assets, and are simply willing to hold idle, zero-interest cash balances."
Apr 16:
"I'm quite aware that the investing world has ruled out any possibility of extended market losses thanks to the confident certainty that the Fed is capable of preventing both market declines and economic downturns indefinitely. But even in recent years, the best that these massive interventions have done is to provoke about 6 months of speculative advances and a brief burst of pent-up demand - each time only after the market has suffered reasonably significant losses."

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