How is the potential QE3 likely to affect

Academic studies shows that most of "impact” on markets comes from the actual announcement of the QE – there is rule of thumb that QE as a whole is worth 50-100 bps on yield (down) and that it inflates equities via "feel good” factor – however if one was to judge it by what REALLY needed, i.e: Restarting the housing market & creating jobs – the results are not there. House prices are 5% lower than then the stock market saw it lows (it went up almost 100 pct from March low – meanwhile housing continued down 5%1) and unemploymeny officially still stubbornly above 9 pct – while old method of unemployment now at 17 pc. The main effect will be to "give the market what they think they need " – rather what the market do need: Dealing with insolvency.

See above and:..... at best one to six weeks of relief – market is no longer willing to sit idle by while the policy makers by time – in terms of upside I think it could give somewhere btw 5% and 15% upside before it comes down again..

This could be the final leg of weak US Dollar – I personally think the US is two or three years away from being fully competititive again as production hub – competing with Asia – Yes, Asia – so for me QE3 will give me opportunity to scale into LONG US dollar – after the grace period. So weaker first, then ultimately stronger multi-year.... this is the end of road of benign neglect policy.

Simple – higher, higher... think we will see 4.000 if not 5.000 in Gold – other metals should follow suit – but as with the US dollar, if this is "end game” – last round then this spike would be followed up by risk aversion which could overall curtail how high.. Again like Gold – but one has to realise this is close to the end of the trend, and for every 100 USD we go up, the risk increases by 200. (I.e: There is more and more speculative hang-over involved)

US is going to zero growth environment – going into actual recession for more than one or two quarters very difficult for US production, as its relative young, innovative and mobile, so low growth.....if we don't get QE3 – we will get some version of Operation Twist – something I have written about extensively – pinpointing support to the bond market to the sector directly relevant for housing and long-term funding 5y-10y sector with pre-announced target rate – below the market – and then selling in shorter matures t-bills to finance- making the exercise relatively balance neutral. There WILL be monetary stimulus – its only matter of in what form and shape.

FOMC can only adjust monetary policy – there is old rule stating that when in a debt trap – only fiscal policy work. Fiscal policy measures is in the hands of the Congress with huge political opposition, at least ahead of the election, but post, it will be different story. There is also political theory which says – the best environment to create growth in is one where politicians have no power to move along legislation (similar to the US from now till US election). Think about Clinton – he has major "program” coming in as President – and failed to get ANYTHING done in his eight years in the White House- leading to the biggest growth period in US' history. So – total radio silence will work as micro ecnomy, investors/private/and companies adjust their behaviour and consumption to the new reality and then start moving forward. The last thing you need is "political noise” and promises of better days ahead.