So it's starting to happen. A few weeks ago commodities got pounded, oil and silver especially. And now stocks are falling rather sharply. It looks like the market is starting to price in the end of QE2 as $6 billion of cash flooding the system every day courtesy of the Federal Reserve will be ending in just over a month. Without this economic life support, we can expect to see deflation rear its ugly head again over the summer as the market desperately tries to cure itself of government created disease. Of course, once people start to see the value of their 401k fall through the floor, housing double dips to new lows, interest rates rise to unacceptable levels and our pathetic job creation ability comes to an end everyone will beg Ben Bernanke to start QE3. And why not? The first two rounds worked so wonderfully, right? As Jim Rogers said, "The money printer will print money." We won't be twisting Bernanke's arm a whole lot before he obliges us.
Expect to see the S&P drop about 20% before Ben is justified in unleashing his Helicopter full of cash. September. Maybe October.