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Message to Fed: Please, No QE3

NEW YORK ( TheStreet) -- The intended purpose of QE1, QE2 -- and potentially, QE3 -- is to bring down long-term Treasury yields.

This has happened, as the yield on the 10-Year Treasury declined to a record low of 1.377% on Wednesday.

This was a test of my semiannual risky level at 1.389%, where investors should have booked profits.

My proprietary analytics have been suggesting that last week's low should be the low for the remainder of 2012, and that QE3 will not take this rate any lower.

On Friday, the 10-Year yield backed up to 1.591% in anticipation of a European Central Bank bailout plan and the announcement of QE3 after the Federal Open Market Committee meets ends this week.

Rates rose as the "flight to quality" faded, as global stock markets and commodities surged.

The unintended consequence of these quantitative easing moves has been additional stress on Main Street, as U.S. savers earn next to zero on money market funds and bank CDs, and as consumers get taxed by higher gasoline prices. The only "benefit" of QE3 is to reignite speculation in commodities, particularly gold and crude oil, and in equities on Wall Street.

Let's look at the Beige Book prepared for this week's FOMC meeting to see whether QE3 is justified.

Overall, the 12 Federal Reserve districts described economic growth as expanding at a modest to moderate pace in June and early July. The key housing market, which would normally contribute 17% of economic growth in an economic recovery, was upgraded from "depressed" to "largely positive" as home sales and construction levels increased and as home inventories declined. Demand for real estate loans grew modestly in most districts.

To me the Beige Book does not justify a QE3. It is not the time for the FOMC to panic; it's the time for the Federal Reserve to stimulate that portion of the economy that finally shows signs of improvement, and that's the housing market, and the real estate loans that support housing.

On June 15 I wrote "Markets Anticipate Euro Bailout and QE3," and today the theme remains the same.

When I wrote that article, Treasury yields were near record lows. Gold and crude oil, the euro vs. the dollar, and the major equity incdices were rebounding as a euro bailout appeared likely. In addition, traders were expecting the Federal Reserve to implement QE3 following the June 19-20 FOMC meeting. So nothing has changed!

On June 20 I wrote, "Advice for Fed: Don't Do the Twist Again," but the FOMC cranked up Chubby Checker. My theme then was that QE3 only helps the "too big to fail" banks and the other large banks in the KBW Bank Index (BKX).