The Dow hitting new highs isn't so special and here's why

I've mentioned QE 3 briefly in another post, but what does that really mean.  The purpose of QE or Quantitative Easing is to:

Quantitative easing (QE) is an unconventional monetary policy used by central banks to stimulate the national economy when standard monetary policy has become ineffective.^[1][2] A central bank implements quantitative easing by buying financial assets from commercial banks and other private institutions, thus creating money and injecting a pre-determined quantity of money into the economy. This is distinguished from the more usual policy of buying or selling government bonds to change money supply, in order to keep market interest rates at a specified target value. (This is the definition from wikipedia full link below)

Essentially QE creates an artificial view of the economy and the markets in hopes that while QE goes on the actual market and economy catch up.  This floods the system with easy money and hopefully lowers unemployment by spurring job growth.  Underemployment should be a bigger concern, but that post will come later.

QE3 is different because there is no pre-determined quantity of money.  As Ben Bernanke said QE3 is indefinite until unemployment is under 6.5%.  (Forbes link to this is second one down)

One big drawback that people are concerned with in the near future is rapid inflation.  Regardless of the fact that it's good or bad for the economy is irrelevant because it's here to stay for now.  This should not affect your investing really because investing is long term and if you invest right market fluctuations in the short term will not be a factor in the long term.

A great Q&A about QE in the WSJ read this if you are only going to read one article 

Quant Easing of 85 billion per month until unemployment is under 6.5%

Quantitative Easing (QE) Wikipedia

The markets and QE 3