Bernanke said only a couple days ago he will proceed with QE2 and more, if need be. I doubt that a possibly temporary 100 bp rise in ultra-low yields will change Bernanke's mind. He is a very serious student of both Japan and the Gret Depression, I get the impression Bernanke know of what he speaks.The Nipponistas are calling for the Fed to ape the Bank of Japan, but Bernanke knows where that leads--oblivion for investors the economy and America's role in the world. Anyway, if you think rates are low now, hold on--they may o even lower. As the global economy recovers, huge pil;es of cash will build up (already are). Sheesh, American corporations are sitting on hoards of cash, banks are holding hoards of cash, private funds are sitting on cash, sovereign funds are fat etc etc ete. There isn't enough places to invest all of it. Hence, even lower yields ahead.The US Treasury is oversubscribed at every auction.
The amount of cash to equities is still enormous. There are 2.810trillion dollars sitting in moneymarket assets. The Wilshire 5000( showing my age) is 12.944 trillion. The ratio is 21.7%. Look at this (dated() charthttp://www.navellier.com/downloads/Wilshire_5000_vs_Cash.pdf We are very far away from beingovervalued on a cash to assets ratio.
Brodero:But what about cash in corporate coffers, private equity funds, hedge funds, sovereign nation funds and in banks? It seems to me that new forms of holding cash have grown since the 1980s and the heydays of money market funds.
I think you are grossly underestimating Bernake's intentions Scott.Inflation is baked into his DNA and his track record for reading market tea leaves is abysmal. Don't count on Bernake reading the same market signals as you. The FEd's history is littered with examples of boom/bust enabling with the belief in clean-up efforts err I mean printing more money to validate their services.
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