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The problem with QE-whatever of course is that it really doesn't do what it is purported to do

One thing QE clearly does do is keep interest rates down. 10 yr treasuries peaked on 9/14 at 1.88%; Friday was 1.65%. 30 yr peaked 9/14 at 3.09; Friday was 2.82. So QE is good for abt 0.25% in interest rates.

And the stock market reacts positively in part because the yield of fixed income alternatives is lowered.

There are some forces out there that would like the stock market to be doing well (and better numbers for the economy would be helpful too) to help Obama get re-elected.

I notice that stocks like Smith & Weston and Olin have both had a bump up since the conventions. Those are stocks favored by gun advocates who fear Democrats might enact gun control. So people are buying guns now in anticipation that Obama will be reelected and Dems may get control of Congress. Perhaps that is too optimistic, but that's how the tea leaves read.

Is this a temporary bubble? Or is the stock market correct in predicting better times ahead?
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