Category

Quantitative Easing

European Woes

Protect Your Money From the QE Delusion

While this week's announcement of a massive new QE program by the European Central Bank (ECB) was the worst kept secret in the world, it may not produce the results that everyone expects.

For one thing, while the immediate reaction was to push European interest rates lower, recent experience in the US shows that QE results in higher rates.

And while everyone is talking about deflation – and Europe is definitely experiencing deflation – the US is still experiencing inflation that could lead the Fed to start raising rates by summertime.

So before getting too carried away with celebrating another major central bank opening up the printing presses, investors should take a serious look at the facts and then decide how to play the markets.

The Fed

Deflation Is Coming (and It's Not What You Think)

Be careful out there.

The stock market rally that started in March 2009… The one that's taken us out of the Great Recession and to new highs… The rally that's driving sentiment indicators of people who benefit from rising financial assets directly, peripherally, or because they hope all boats rise with the market…

The rally has never been loved.

The thing is, equity markets don't need love to go twice as high from here, or three times as high in the next 20 years. If they get what else they need, they'll keep going higher.

We could be on the verge of a generational bull market. That's if deficit-plagued, interconnected global sovereigns deleverage and, at the same time, re-capitalize middle and rising classes by making "recourse-sound" capital available and simultaneously reconstituting entirely the notion of taxation.

Too bad the likelihood of that happening is somewhere between slim and none.

That's one reason why I'm an increasingly reluctant bull.

But there's another reason too.

And it has to do with deflation...

Your Money

Time to Buy These "Out of Print" Assets

From the Editor: We've been tracking this threat for years, ever since Keith Fitz-Gerald brought it to your attention back in January 2010. Today, Resources Specialist Peter Krauth weighs in on some recent developments in this story, because three of the commodities he covers can protect you. The Fed can't print these things… Here's Peter.

Central banks may have foolish policies, but central bankers are no dummies.

They know exactly what they're doing. They even comprehend a few of the implications, too.

Which is why it's interesting that some American central bankers have suggested doing away with the debt ceiling altogether.

Famed investor Marc Faber recently said, "The question is not tapering. The question is at what point will they increase the asset purchases to say $150 [billion], $200 [billion], a trillion dollars a month."

Faber expects the Fed's current QE4 to become "QE4-ever."

That could mean years of money printing and ultra-low rates.

Even bond king Bill Gross recently chimed in his latest monthly outlook that "The United States (and global economy) may have to get used to financially repressive – and therefore low policy rates – for decades to come."

Either way, don't depend on the Fed to save you. You can save yourself.

And now you'll need to...

Emerging Markets

How the Fed QE Taper Will Affect Foreign Markets

Hints from the U.S. Federal Reserve this week that the quantitative easing (QE) taper is near pushed the Dow down 105 points Wednesday – but the idea of less Fed stimulus has caused much more turmoil in certain overseas markets.  

The problem: A corresponding hike in U.S. debt yields has fueled higher borrowing costs around the globe. This has led to the flight of cheap capital out of emerging currencies and markets.

That triggered the following reactions:

Precious Metals

What You Need to Know About Silver Prices and the Fed QE Taper

Silver prices have rebounded about 28% since the lows of late June, and are currently trading at around $23 an ounce.

This move was key for silver prices – it means the metal broke out above its 50-day moving average.

Barclays' technical analysts pointed out that last week was silver's best week since 2011, with a gain of 14.3%.

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Income Plays

How to Succeed in the Low-Yield Inflationary Matrix

In the 1999 sci-fi film, "The Matrix," the mentor Morpheus turns to the protagonist Neo and says, "Do you think that's air you're breathing now?"

The quote has become somewhat of a modern classic movie line, as the words serve to enlighten Neo that all is not what it seems in the world he perceives.

For income investors, there's a new matrix of sorts, and it's a world dominated by the very real toxic cocktail of low yields and rising inflation.

Income investors-most of whom are near or already in retirement-now are forced to breathe the thick air of dwindling income from traditional sources, and the rising costs of all sorts of goods and services.

On the yield front, we've seen the pernicious effects of the Federal Reserve's easy money policies on traditional yield-generating securities such as Treasury bonds.

Precious Metals

Why Ben Bernanke's QE3 Comments are Bullish for Gold Prices

When Ben Bernanke speaks, the gold market listens – closely.

The Federal Reserve chairman's comments late Wednesday that the central bank would continue its QE3 economic stimulus for now drove gold prices higher, and they're likely to keep rising.

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The Fed

Your Best Strategy for Playing This QE Rally

Don't worry. The bubble "Quantitative Easing" has built is still intact. For now.

However, even though there's breathing room, don't think it's time to breathe easy. There will be Hell to pay, just not now.

And I have found three opportunities to take advantage of the next phase in this unsettling market.

But let's gather some perspective first.

The news that the Fed might taper QE bond purchases gave the bond (and stock) markets a fit of the vapors and caused gold to careen toward $1,200 an ounce.

The Fed

Bill Gross: Why QE Will End Before the Fed Wants It To

Legendary bond guru Bill Gross doesn't think too highly of the Federal Reserve and Ben Bernanke's monetary policies.

"There comes a point when no matter how much blood is being pumped through the system as it is now, with zero-based policy rates and global quantitative easing programs, that the blood itself may become anemic, oxygen-starved, or even leukemic, with white blood cells destroying more productive red cell counterparts," Gross writes in his June investment outlook titled Wounded Heart.

Gross believes that QE, which he describes akin to a bad dose of chemotherapy, will end later this year but not because of a suddenly strengthening economy.

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Investing Tips

What to Do Now as the End of QE Nears

If investors needed a reminder that global stock market rallies have been goosed by the Fed's lose monetary measures, they got it.

On Wednesday, U.S. equities went on roller-coaster ride.

The Dow Jones Industrial Average, up 155 points before FOMC Chairman Ben Bernanke said the Fed could soon begin to tap the brakes, ended the day down 80.41, or off by 0.5%,.

The uncertainty of when the Fed would begin to wind down its $85 billion-a-month in asset purchases sent investors to the sidelines in a hurry.

"This is a very sensitive market and particularity sensitive to any notion that tapering will come too soon," Quincy Krosby, market strategist at Prudential Financial in New York told Reuters.

"No one wants to be selling if the data reaches the point when the Fed begins to specifically talk about tapering. The market doesn't wait for the Fed to move. It will move before. That's how it operates," Krosby continued.

Of course, we knew QE couldn't really last forever. So what should investors do?..

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