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Politics : President Barack Obama
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To: Sr K who wrote (120141)9/7/2012 4:29:35 PM
From: RetiredNow  Read Replies (3) of 149317
 
Transactions between the Fed and Treasury are moving money from one pocket to another. Any purchases by the Fed of Treasuries is essentially money printing...called monetization of Congressional deficits/debt. These are not "investments in securities" as you say. Money printing to buy securities of any sort is an increase in the money supply and a devaluation of the dollar. Sure, everyone gets excited about the short run upward impact on the securities purchased, influenced primarily as a result of the volume purchasing power of the Fed. But please don't confuse this with real wealth.

Also, please don't confuse yourself into thinking that Congress paying interest to the Fed for Treasuries the Fed purchased with newly printed currency is a great way for the American taxpayer to increase wealth. It is nothing short of ponzi-esque activities.

As far as downwards earnings expectations. First off, what I showed you were not expectations. It was actual earnings trends and the trend has been down sharply. As far as expectations, sure lower expectations are easier to beat, but expectations are leading indicators. If earnings expectations are sliding, then the stock market will likely follow. Even if there was no PE compression, the same PE multiplied by lower earnings, results in a lower expected value for the S&P. That's the real arithmetic you should be looking at.
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