Get Ready for QE3

Get ready for QE3, or whatever the Fed (Bernanke) is going to call it.  (I believe it will be referred to something other than QE3 because of the underlying negative connotation of QE1 and QE2.)  QE2 ends on June 30, and the equity and metal markets are already going through withdrawal symptoms induced by the upcoming lack of liquidity.

My sussing for the next QE is based on the following facts and statements:

1. On May 12, Alan Blinder, Princeton economist and former Fed Vice Chairman, stated, "more monetary easing is necessary.”
2. On May 13, Goldman's Sven Jari Stehn in a paper titled "Fiscal Adjustment without Fed Easing: A Tall Order" in which he states that the only thing that can prevent an economic contraction in the next two years will be more monetary easing.
3. Today, May 17, data for housing starts and permits were abysmal.  Starts came at 523,000 on expectations of 569,000, down from revised 585,000 previously. Permits were also ugly, missing expectations by a comparable account, printing at 551.000, with consensus of 590,000.  Probably the most interesting number was the number of houses under construction, which hit a fresh all time low on an annual, seasonally adjusted basis, or 418,000.

There you have it.  With economic and financial weaknesses across the board and statements by Goldman Sachs and ex-Fed personnel, I would say another form of QE is on the horizon.  And, when the announcement is made, that may just be the time to invest again in equities and precious metals.