What the Fed Knows, June 1 2011

Gold spikes on grinding economic halt, coming Fed QE3

Steve WatsonPrisonplanet.com
A notable market strategist has told CNBC that the world is on the verge of the largest financial meltdown in history, warning that Wall Street is at a loss as to what to do regarding the ailing economy.

“Interest rates are amazingly low and that, thanks to Ben Bernanke, is driving everything,” said Peter Yastrow, of Yastrow Origer.

“We’re on the verge of a great, great depression. The [Federal Reserve] knows it.” the futures trader added.

“What we’ve got right now is almost near panic going on with money managers and people who are responsible for money,” he said. “They can not find a yield and you just don’t want to be putting your money into commodities or things that are punts that might work out or they might not depending on what happens with the economy.”

Yastrow described betting against the U.S. economy as “a huge mistake”, adding that he would not sell stocks at this point.

Any bears out there better be careful because the dividend yields on these stocks look awesome relative to all the other investment vehicles out there,” Yastrow said. “So bears are going to have to find a new way to express their discontent with the U.S. economy.”

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Meanwhile, gold spiked today on the news that a third round of so-called quantitative easing on behalf of the Federal Reserve is in the works.




“There’s a lot of iffiness about the end of QE2 and questions about whether there will be a QE3,” said Matt Zeman, a strategist at Kingsview Financial in Chicago. “There’s a serious soft patch in economic data, and the Fed is not going to be able to raise interest rates anytime soon. That’s going to be a dollar negative and gold positive.”

Gold futures hit a four-week high today as the dollar slumped to a three week low and equities continued to decline.

Futures for August delivery reached $1,551.60, the highest since May 2, before dropping back to to $1,550.30, still a rise of $13.50, or 0.9 percent.

“The dollar is starting to weaken again,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “Stocks are selling off, and there’s a flight to quality into gold.”