It’s all about expectations. A nebulous concept, to be sure, but one that’s not beyond influencing macro outcomes with some control via monetary policy. To what extent? To what end? Ideally, it runs like this, as per Professor David Beckworth: “Here is why I think QE will pack an economic punch, if done correctly. The expectation of permanently higher prices will cause cash-flushed firms, households, and other entities to start spending more today. Right now there is an excess money demand problem that could be stemmed by meaningfully changing the inflation outlook.”

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Is rebalancing a tool for managing risk? Or maybe it’s a source for minting benchmark-beating returns. No, wait–it might be both. Really? In the new issue of Financial Advisor magazine, I take a fresh look at rebalancing in: Rethinking Rebalancing.

Critics of the anticipated launch of the Fed’s new round of quantitative easing (QE2) to lower medium and long-term interest rates have fallen into two broad camps. One says that the policy won’t work. The second argues that QE2 threatens to create new problems for the economy, ranging from higher inflation that spirals out of control to asset bubbles and other negative consequences. And, of course, some attacks incorporate both of these points.

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