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Zacks #1 Stocks on the Move 05/17/2013

Company Name Symbol %Change
VIASAT INC VSAT
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GAMCO INVEST GBL
4.61%
CORNING INC GLW
4.47%
SYNCHRONOSS SNCR
4.23%

When Fed QE Goes Bust

by Kevin Cook

July 17, 2012 | Comments : 1 Recommended this article: (0)

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I'll admit it. I've been a Keynesian. To me, pumping money into the economy, and monetizing debt through quantitiatve easing (i.e., printing new money), was the best course of actionsince 2008because the alternative -- a Japan-style deflationary spiral -- was unacceptable and entirely avoidable. Inflation, of any amount, was worth all the risks.

But something curious is going on. The economy is not recovering in a robust way. After today's disappointing retail sales trend continued, Goldman Sachs lowered their 2Q GDP estimate another 2/10thsto 1.1%. They had dropped it to 1.3% from 1.6% just last week on more dismal economic data. Yet financial markets -- stocks, bonds, gold, commodity prices -- seem to really benefit from QE. Below is a chart from a group called Phoenix Capital Research which plots the S&P 500 index minus the 24-hour pre-FOMC price ramps. Granted there are other ways of looking at the effectiveness of QE on both markets and the economy. But today I am wondering if QE is still a necessary evil, or if it's actually distorting markets and could possibly damage the long-run health of the economy. What do you see for the next 6-18 months of the US economy, with or without QE? RELATED ARTICLES

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