To Infinity and Beyond!

So the question of the week is: what does it mean to pump $85 billion (with a "b") a month, or $20 billion a week into asset inflation in the interests of making us all feel rich in time for the U.S. election. What is truly alarming about QE3 is its foreverness. Our American cousins are simply going to print vast amounts of money forever. No fiscal stimulus that would reignite a rebuilding of a broken infrastructure or a shoring up of social programs but a fiscal infusion that amounts to permanent life support for various classes of equities: i.e. for the rich. And the Europeans are apparently going to act in concert.

Oddly, the market reaction thus far is tepid. A half percent and a market that remains firmly range bound. It will take time to see if other asset classes react more robustly, but there appears to be an weird calm as if all of this pumping up is simply keeping a very leaky balloon from deflating.

As I noted earlier, we remain at the cusp of an historic two decade topping pattern. Patterns morph, and this one might. An S&P500 moving strongly through the 1500 mark would be just such a change. But volume continues to decline. The fundamentals are horrid. And there is a growing concern that this phase of capitalist development has run its course. If that is the case, technical analysis suggests that a 60-70% decline followed by a semi-permanent flatline is not out of the question, as the Japanese found out a generation ago.