With Uncle Ben renewing his vendetta against the USD/EUR cross, investors need to hedge both their equity risks and also their currency risks. One strategy to consider, is to "trade" the Fed instead of fighting the Fed. When stock markets drop and the dollar rises significantly, expect Mr. Chairsatan to light more money on fire, pushing gold higher (which is not real money apparently to Ben) and stocks up on short squeeze algos. While now may be a good time to buy S&P 500 (SPY) and QQQ put options, once a steep drop in equities emerges, investors have to expect the Fed to step back in to disrupt the free market for stocks and currencies.
While I am not bashing the Fed, I am keenly aware that Mr. Bernanke is not a friend to a free system of price discovery, which is so vital to value investors and those looking to deploy savings into an overvalued stock market. Today's semi-annual conference speech by the Chairman shows that gold is not an issue and that oil prices are not his fault -- he is signaling that QE3 is on the table, but I believe that QE3 is politically untenable. QE2 was a direct tax on the poor and middle class. It did nothing to create jobs, but it made stocks too overvalued to buy, oil and gasoline prices rise, which is a form of taxation, and food and rent costs to soar.
If our aggressive Fed chairman wants to "game the system" and daytrade the global financial markets, expect higher prices for the following ETF's. Additionally, if QE3 is announced, some of these funds should go parabolic. Read More
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