Q: What is the likelihood of QE3 occurring? If it happens, then does this mean there will be more trouble for real estate?
This month's question is answered by Michael Dubis, CFP (BBA '99). Mike is a Lecturer in the Graaskamp Center where he teachers two courses: Real Estate in the Capital Markets and Real Estate Contemporary Topics. He is also President of Michael A. Dubis Financial Planning, and he is frequently interviewed and quoted by many local and national media venues, such asMoney,Kiplinger, The Wall Street Journal,Milwaukee Journal Sentinel, Smart Money Magazine, and Bloomberg.
A: Uncertain in my view.
I think many famous bond managers, such as Bill Gross who has probably at least $70billion of margin cash to buy over $100B of MBS, are betting wildly on it. It seems the collective "market place" as well is leaning toward its arrival. If Greece defaults and that leads to another major bank default, then I would say it's a certain event.
That said, a handful of statements by the Fed Reserve Chair Bernanke suggest that the economy remains depressed and basically inferring that the previous QE 1 & 2 have not necessarily done a lot to increase economic activity.
So you have the stock market and many bond managers believing it's a high probability event while the Chair himself is not committing (yet) to further easing. . . so I'm just not sure. I personally lean with the market since the market place is very efficient at pricing information, but the market is also very efficient at surprising folks too.
I think real estate could possibly benefit if this next round finally leads to banks opening up their lending further. We're seeing a lot more lending lately as it is, so it's possible QE3 could push it further and would actually help real estate.
Markets and policymakers don't always agree though.
I can't lose - do I sound like an economist or what?
This month's question was submitted by Jordan Denzer, a first-year real estate MBA student.
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