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This Market Is "Going Vertical" – And so Are These Stocks

In our Aug. 6 Private Briefing report, "It’s the Biggest and the Fastest Growing – Here’s How to Profit," we updated our bullishness on China‘s e-commerce market and gave you two ways to ride along.

We had a lot of confidence in both recommendations. But I have to be honest with you: Even I didn’t expect the stocks would soar like they have in the two seeks since.

  • Featured Story

    FOMC Meeting This Week Will Benefit This Currency Trade

    There is nothing more volatile on the currency calendar right now (or on any financial calendar for that matter) than the Federal Open Market Committee (FOMC) meeting this week.

    This is going to be followed by what is expected to be Ben Bernanke's last press conference as the Fed Chairman before his anticipated retirement in January 2014.

    And let me tell you: Someone is going to be surprised this week. The good news is, surprises create volatility. Volatility creates price action. Price action creates profits.


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  • This week's FOMC Meeting

  • FOMC Meeting: Look to Statement for QE Clues Binoculars black Q

    Don't expect a definitive answer from this week's Federal Open Market Committee (FOMC) meeting on when the Fed will begin tapering its massive quantitative easing program.

    Instead, the focus will be on the FOMC's statement, which will be scoured for clues about when scaling back QE3 could begin.

    "We do not expect any modifications to the asset purchase pace or forward guidance at this meeting, so markets are likely to hang on every word change in the statement," Michael Hanson, an economist at Bank of America Merrill Lynch Global Research, said in a research report.

    This month's FOMC meeting is the last before September, the month the markets have been expecting the Fed to announce "the taper."

    Brian Gardner, senior vice president of Washington Research at Keefe, Bruyette & Woods, said the economic outlook will be key to finding taper clues.

    "We do not expect any changes in policy (either for large-scale asset purchases or for Fed funds rates) but the commentary on the state of the economy could be significant," Gardner said in a research note. "As Fed officials have recently reinforced their intent to look at the outlook for the labor market and the economy, any change in the Fed's description of the economy could provide a better idea of when the Fed might taper asset purchases."

    But, Gardner added, "Our guess is that any change in language will be nuanced and keep the markets guessing about when the Fed will taper."

    He said Friday's jobs report may ultimately be as significant as the FOMC statement in terms of gauging when tapering would take place.

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  • FOMC Meeting: What the Fed Policy Changes Mean For You The Federal Open Market Committee (FOMC) meeting ended yesterday (Wednesday) with two important changes to Fed monetary policy.

    First, the central bank said it would increase the amount of quantitative easing by replacing Operation Twist, which ends Dec. 31, with outright purchases of long-dated Treasury bonds.

    Under Operation Twist, every month the Fed sold $45 billion in short-term Treasury bonds and notes and bought $45 billion of long-term Treasury bonds in an effort to keep long-term interest rates low.

    Because the Fed funded its purchase of long-term bonds with the sale of short-term bonds and notes, no new money was created.

    However, outright purchases of long-term bonds will create new money-$45 billion every month-and, by concentrating its buying at the long end of the yield curve, the Fed should be able to keep long-term interest rates low.

    The Fed also said it will continue to purchase $40 billion of mortgage-backed securities each month, creating a total of $85 billion in new money from these operations monthly.

    That means QE4 is here.

    Starting in January, the Fed will be more than doubling the amount of money it is pumping into the economy. Happy New Year!

    Second, the Fed set unemployment and inflation "thresholds," instead of setting a date for when the central bank expects to be able to raise interest rates. What this means is that the Fed will not raise interest rates unless unemployment is 6.5% or less or inflation is more than 2.5%.

    By setting thresholds where monetary policy might change, the Fed is attempting to improve its communications with the public.

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  • Today's FOMC Meeting Ends with Major Change After today's Federal Open Market Committee (FOMC) meeting, the Fed announced it would expand the third round of its bond buying with fresh stimulus, replacing the soon to expire Operation Twist, set to end Dec. 31.

    And in an additional unprecedented move from the central bank, interest rate decisions will now be tied to the unemployment rate and inflation.

    About a half hour into the release, the Dow Jones Industrial Average staged a near 65-point rally - but then lost that gain and ended down nearly 3 points at 13,245.45.

    Here's a breakdown of the FOMC meeting outcome.

    Today's FOMC Meeting: QE4

    As expected, the FOMC meeting ended with a replacement for Operation Twist, the expiring program introduced in 2011 of swapping short-term Treasuries for longer dated ones. The goal of Operation Twist was to lower long-term interest rates to stimulate the U.S. economy.

    The new asset purchase program is an extended arm of the Fed's familiar quantitative easing programs, and has thus been dubbed QE4.

    Now with QE3 and QE4 together, the Fed will purchase a whopping $85 billion a month of Treasury securities, stacking the Fed's portfolio with government-backed investments for an extended period.

    The buying spree will remain intact until the unemployment rate falls below 6.5% and inflation projections remain no more than half a percentage point above 2% for two years out.

    The Fed also left interest rates at rock-bottom historic lows near zero, as was also expected.

    While these moves were widely expected, what wasn't expected was the Fed's forward-looking guidance.

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  • This Week's FOMC Meeting: Why to Expect More Stimulus Investors should expect welcome news from the U.S. Federal Reserve Wednesday at the end of this week's two-day FOMC meeting.

    As central bankers gathered Tuesday for the last policy meeting of the year, expectations were high that Fed Chief Ben Bernanke and his cohorts will announce a large scale asset purchase plan to replace the soon-to-end Operation Twist, introduced in September 2011.

    The Fed hopes additional stimulus will finally boost growth and the employment level. With the current unemployment level at an elevated 7.7% -- a number that economists say will be revised higher in the coming weeks - the weak labor market remains a grave concern.

    At recent meetings, the Fed indicated that it will continue QE3, the policy of buying $45 billion in mortgage-backed securities each month until it sees a significant and sustained improvement in the employment scene - which is unlikely to come anytime soon.

    Together with Operation Twist, the two programs added some $85 billion in long-term bonds to the Fed's balance sheet each month.

    The aim, the Fed said in a statement, "should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative."

    The central bank has also stressed it would employ its other policy tools "if the labor market does not improve substantially."

    While the Fed did not elaborate on what those tools are, it maintains it still has plenty of ammo left and stands ready to pull the trigger when and if necessary.

    It looks like now is the time.

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