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Why do equities like Quantitative easing?

Discussion in 'Beginner's Lounge' started by db94, Nov 15, 2013.

  1. db94

    db94

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    Pretty much what the title says. Ive been some commentaries of financial anaysts and they have been saying that the equities market has been driven by QE. Why is this? I understand the process and its effects on the exchange rate but why does it drive the equities market?

    cheers
     
  2. CanOz

    CanOz Home runs feel good, but base hits pay bills!

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    Re: Why do equities like Quantitative easing

    Lots of reasons:

    -Business/bubble friendly, lots of credit available for expansion of the economy
    -Makes other asset classes less desirable by driving down interest rates, like bonds and cash
    -Creates a sense of security (false) that helps consumer confidence that equals more spending
    -Frees up cash to be invested in the markets

    At the end of the day though, low interest rates = good for equities...higher rates = bad for equities.
     
  3. db94

    db94

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    awesome thanks
     
  4. Joules MM1

    Joules MM1 ....everything has an art

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    Re: Why do equities like Quantitative easing

    hmmmm....horse n cart.......low interest rates might only be good for speculators, not everyone....there has to be demand (inflationary) for the extra credit debt.....but how much healthy demand is there, being that, healthy means on any sudden hit the credit debt doesnt just get marked off, that is, prices dont suddenly get marked down .....the previous Bernank admitted to simply creating credit debt on a screen, so when prices get marked down that credit debt simply gets written off, disappears - vamoose!

    Business+loans+as+percentage+of+banks+balance+sheets.png

    read more http://soberlook.com/2013/11/need-corporate-loan-forget-your-bank.html
    and this
    BYxEH1nCAAIFEYb.png

    i'll get long when price says to be long, but, it doesnt imply there's a sustainable market around me.....

    locally, the central bank keeps attempting to induce inflationary action by reducing rates....high interest rates dont translate to declining economy so what can make declining interest rates improve an economy...it must be followed by demand, by a sense that loans can be easily repaid....rates moving up or down are not mutually exclusive to markets being healthy only markets being temporarily in wider flux and we know that all phases exhaust.....in the euro zone there are clear deflationary trends even with the low interest rates...Japan....at one point the Japan central bank even went into negative interest rates.....

    i think the word credit needs to be called credit-debt ....and people are far more likely to understand when they see that debt being used to drive prices which benefit anyone with the technique to use that debt and also instils a sense of urgency to be insured for the phase that comes at the end of that binge

    low interest rates do not translate to healthy economy or healthy stock markets......these things are coincidental to each other.....again, Japan.......

    how far outside of 'fair value' is the 40 pound gorilla and how far can the indexes travel before that gorilla has had enough bananas


    and here's a good quote to think why the us indexes are being raced up rather than bought up on healthy demand.....
    you see, when youre a major player with cheap credit and your job is to make money from money and the final musical chair is the chair you now own and no one can take away .......you effectively have the Fed by the goolies...prices will peak at some point and swing back thru fair value

    all in my street-view opinion, of course
     
  5. Joules MM1

    Joules MM1 ....everything has an art

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    the real reason the QE infinity is liked is the-goolie-squeez......:D

    oh and taper, just another word for low-tar cigarette......same lungs
     
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