QE ending?

I know some readers are long the precious metals, so I thought I would chime in with my admittedly subjective take on future Fed actions.

If QE 2.0 is not extended beyond June 30, after Fed announcements in April, look for all asset classes to decline, including possibly gold and silver (and mining companies).  However, I view a correction (dip) in the mining sector as a buying opportunity, because when the economic indicators tank as a result of the ending of QE, the Fed and monetary authorities will figure out the economy is too fragile to stand on its own, and will need further injections of liquidity to continue its "recovery."

It may take them several months of states and municipalities going bankrupt to figure out they can't stop the printing press, and will need to bail out these entities as well as sectors like commercial real estate.  Then, they will stealthily implement new rounds of stimulus, which will enable a resumption of the bull market in precious metals.

Long-term buy and holders need not do anything right now, and perhaps even buy the dip if and when it happens.

Traders may want to take some profits off the table, and wait for the buying opportunity to re-deploy the cash.  Aggressive traders may consider shorting the commodities complex, but that's not something I would personally consider, because front-running and fighting the Fed could be hazardous to your health if you mistime it.

Of course, I could be wrong:  if QE gets extended, the bull market in precious metals could continue onward and upward without pause.  Which means even if I do sell out of some positions, I won't sell everything.  Instead, I will possibly take only partial profits, and wait for the dip to occur--if it ever does.

Jim Rickards and Chris Whalen have submitted fantastic interviews and reviews on the topic of the potential cessation/continuation of QE, and how the Fed can use its enormous balance sheet to shape the bond yield curve, shifting it to shorter term securities without drastically expanding their balance sheet.  In other words, the Fed can surreptitiously continue rounds of QE in an attempt to stimulate the economy without drastically expanding their already bloated balance sheet.

See disclaimers in the side bar.

Disclosure:  long precious metals equities.