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Created on: 6/10/2011 5:39:52 PM Last Update: 6/10/2011 5:51:58 PM Posted by: RTT
WARNING: This entry is 5355 days old. It may contain broken links, out-dated or misleading content. Please read on with caution.
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QE3 only when there is blood in the street, Tepper concurs
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 David Tepper of Appaloosa Management confirms what the market is waking up to slowly. No more QEs until the market players, media and politicians are screaming for it. Then Ben Bernanke can say, 'Hey it wasn't my idea'. So whats Mr Market to do, of course sell off, the best way to get a 15% rally is have a 20% sell off. The smart money left the market on the news of the Japanese quake, the volume for that down swing was huge compared to all previous down swings since the Jackson Hole Bernanke speech.
Ok we added the 'blood in the street' comment.
QEs wont work for the general wide economic situation, it will be great for banks who speculate. The monster stock market rally from the March 2009 lows was on the back of two consecutive massive programs QE (quantitative easing, or the fed buying treasury paper). No QE No rally ! The SP500 should be around a 1000 or less.
So until then: Risk Off, just as we have said it in previous posts.
Source: Zero hedge David Tepper of Appaloosa Management Extract
The head of Appaloosa Management and source of the "Tepper Rally" that generated a huge run in the market last September said in an email to CNBC that stocks would have to fall considerably more before the Fed would start another round of quantitative easing, or QE.
The market has been rife with speculation since a 6 percent drop in stocks on whether the Fed, faced with persistently high unemployment and a double-dip in housing prices, would step in with more easing.
But Tepper told CNBC that the fall in stocks since the May 2 post-financial crisis high was "not enough of a drop" to bring the central bank in off the sidelines. QE2 is set to expire at the end of June with the last of $600 billion in Treasurys purchases.
He also said that further easing might only spur more energy and food inflation, meaning the Fed has to "let it ride" for now.
As such, he expects tough sledding for stocks ahead.
"We (are) in a difficult investment environment," he wrote. "Short and Sweet."
UPDATE: Just saw this post by Barry Ritholtz (The Big Picture Blog). Here is the 'WHY' you will get 'blood in the street'. When QE2 stops whos gonna buy the US debt paper, and if so at what yield. Market players and the Bernanke Fed knows that if you want to sell US Treasuries at a low yield then the best way to do so is 'scare the market' so that the defense play is actioned. Or in other words force the selling of stocks and commodities so that bonds will have a buyer. 'Blood in the street' means YOU will be replacing the Federal reserve in buying US debt. And if you dont, oooouch !
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