QE - To Infinity and Beyond!

The stock market has had a small pullback this week after the ECB and Fed-induced rally over the past several months.  Part of the pullback was due to Charles Plosser, a Federal Reserve President, who made waves this week when he gave a speech criticizing the Fed's recent QE3 program.

From Marketwatch.com: One of the leading hawks on the Federal Reserve slammed the central bank’s new asset purchase program on Tuesday, saying that it wasn’t necessary, wouldn’t work and is risky.

http://articles.marketwatch.com/2012-09-25/economy/34075236_1_qe3-charles-plosser-improvements-in-labor-markets

In our view Charles Plosser is right, there is nothing that the Fed can do right now to help lower unemployment or grow the economy.  The first quant-easing program in March 2009 was necessary to stabilize the financial system but other programs the Fed has implemented since then have had little impact and have actually led to higher food and gas prices in the eyes of many economists.

Excessive regulations, 2013 tax uncertainty, the election and the fiscal cliff are among the issues holding back growth in the economy and in employment.  As the Fed continues to push on the string that is QE3, the challenges they will face when they try to unwind these programs will become greater and greater.

As much as we did not agree with the Fed's QE3 decision we did expect them to act and used the prior 4-5 months to take some investment positions that were well positioned for QE3.  We will continue to work hard to spot investment opportunities, while keeping a watchful eye on risk.