QE taper withdrawing liquidity from stocks

This clip starts out with the usual carnival-promoter comments from salesman Smith, but then quickly moves to a relevant discussion from Boockvar on the tightening effects of the QE taper withdrawing speculative liquidity from stocks. Keep in mind that having a big firm strategist predict a 10% “correction” is considered radical, so daring to speak of the likelihood of -20% to broad averages is a very brave call for business television.

“When the Federal Reserve ends its latest bond-buying quantitative easing program, stocks could drop 15 percent to 20 percent, said Peter Boockvar, chief market analyst at The Lindsey Group.

That’s how much the market dropped when the Fed ended QE1 and QE2, Boockvar said in an interview on CNBC’s “Squawk Box.”

“I think we’re going to see a repeat of that,” he said.

“I think we’ve already seen the rumblings of that in the Russell 2000 [and] a lot of high-flying Nasdaq stocks,” he continued. “And I do think it’s going to sprinkle into the bigger cap S&P and the Dow names that people have been hiding in.” Here is a direct video link.

Of course in reality, -20% would be extremely mild within the context of the steroid-fueled cyclical rally that QE has bought within the context of our ongoing secular bear that has once more pushed reliable historical valuations into the wild-blue yonder…

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