Our View on QE3

We rarely, if ever, make predictions on markets.  Our view is that there are enough people with those opinions, and who are mostly wrong.  We follow the supply-and-demand movements between asset classes to determine where best to place clients’ retirement funds.  However, once in awhile, we do come across an observation that is worth sharing and watching closely.  One such observation is the graph with this link, http://research.stlouisfed.org/fred2/graph/?g=bS2  that compares the size of the Monetary Base with the price of Gold.

As noted on the graph, the data is provided by the St. Louis Fed’s website, www.research.stlouisfed.org.  This website is chock-full of useful information on almost anything financially related.  Notice during the periods of the Federal Reserves’ two previous Quantitative Easing actions, known as QE1 and QE2, that the Adjusted Monetary Base, M1 Money Supply, increased substantially.  Interestingly, the price of Gold also increased.  Other things increased during these times, such as the prices of U.S. stocks, gasoline and food.  Now, do not take this information and invest all your hard earned retirement money in gold…I am not saying to do that.  However, some people may want to consider investing a portion of their retirement funds in commodities.

Maybe it is time for you to seek a second opinion on your retirement assets.