Comment: Bill Gross Still Puzzled By QE.....

I heard Bill gross say in that interview that he thought an end to QE3/4EVER would be more likely to send long term bond yields higher. Hasn't he learned anything after his last disastrous call that rates would surge higher when QE2 ended in Jun 2011? Anyone who still believes that and end to QE will cause bond yields to surge higher has not been paying attention to to how the bond market has reacted to QE since 2008. Just look at the charts. Every time QE operations commence, yields shoot dramatically higher and when QE programs come to an end, bond yields fall just as dramatically.

This is not rocket science. Rightly or wrongly most market participants perceive that Fed QE operations equate to printing money and are therefore inflationary. So, they make the logical adjustments to their portfolios. As soon as it becomes clear that another round of QE is in the cards they sell the dollar and bonds and buy equities, commodities and credit -- i.e. RISK ON. And, as QE comes to an end they reverse that trade an take RISK OFF.

The Fed has a failure to communicate because they say they are doing QE to bring down long term interest rates down but at the same time they say they are trying to raise inflation. The Fed can't have it both ways. How can they say that they are trying to raise inflation and not scare bond holders?