QE2 is like a Pay Per View Fight...

Quantitative Easing part 2 (or QE2) is the Federal Reserves attempt to stimulate the economy through the printing and purchase of roughly $600 Billion dollar's in bonds. The Fed has two primary responsibilities and that is achieving maximum employment and price stability. So we've all been watching closely as I'm personally curious as to how this latest experiment will turn out. Of course, if you're the Fed you probably don't want to hear me calling it an experiment. This is why the discussion of the Fed's actions have been much like a prize fight. There are many economists that have pulled out the punching bags and are calling the Fed's actions a waste of money, devalues the dollar, and wishful thinking. Oddly, the Fed has openly punched back and noted that their actions are to jump start a stagnating economy which continues to lead to high unemployment and very low inflation.



Well the Fed's buying has begun and I have honestly been paying attention to the war of words a little too much. I got a little jittery as their has been more volatility over the last few weeks and I got to portfolio watching. But at the end of the day, I believe the Fed will get what they are looking for and that is more velocity. I think the move is actually to get the average investor that has been hedged (like me) or burned (like many) to move from their large bond positions back into stocks. As you have seen my writings here I believe that this is the gradual approach to take. I don't think you go crazy and just remove your bond positions but you begin to reallocate away from this great trade over the past few years. The other thing that may happen with more money in circulation is higher inflation. Well I doubt that will have a serious immediate action because if you're still thinking like me I am waiting for retailers to continue to drop their prices or they aren't getting my dollars. If I have this perception, many others do and the threat of inflation is real but not coming right away. Note...if it does we are slowing building a portfolio that has exposure to TIPS and commodities which will do well against inflationary pressures.

Note: This article was started in Nov and finalized on Dec 09

All that Glitters...Might be Gold, Silver, Platinum, and Palladium

I have to admit I am big on Glitter right now. And I am not referring to Mariah Carey, who may have done an album and movie with the same title. I'm taking about the glitter of shiny metals. You know the metals that coined the phrase Bling Bling in the hiphop world. Don't believe me check out the old Cash Money Record artist BG who had a huge song that turned this phrase mainstream.

But back to my purpose for writing this article. My goal is to point out that it appears we have been fairly right about the direction of the economy and how it keeps chugging along. This is a slow and steady chug that has been scary because at times it feels like we could fall back to those dreadful days of 2008 & 2009. I struggled back then with identifying exactly how to setup and reallocate my portfolio for the future. If you recall I was in the camp that the economy was really bad and I even made the drastic decision to pull the string on all risky and mediocore stocks in your portfolio. The fact is they never should have been there but thats another story for another day. My guess back then was to increase your exposure to the following investments:

~ Gold (through ETFs)
~ Treasury Inflation Protection Securities (commonly known as TIPS)
~ Dividends

Well it was arguably a good call back then but the hard part for me was actually finding out the best ways to take advantage of this strategy. I have been very slow outside of identifying the obvious which is through ETFs. So I am going to place more of an emphasis on the identifying which stocks can help fulfill this strategy.

These asset classes are important because the Federal Reserve is acting to stimulate the economy which is suffering from limited core price appreciation (inflation) and job losses (9.6% unemployment, 17+% underemployed). Because politicians won't stimulate the economy the Fed realizes that someone must. They shouldn't be the only game in town because they don't have all of the tools...like say calling for a tax cuts or passing a huge infrasture bill. So their best solution is to flood the economy with CASH. This does a few of things:
1. Makes holding safe cash investments less desireable; stocks and riskier assets will rise
2. Supposed to make banks lend more because interest rates will be low and attractive
3. Make American made goods cheaper and easier to export as the DOLLAR loses value

Where I plan on exploring:

Hard Assets - Not just Gold but silver, platinum, palladium, real estate tend to rise in value and the dollar loses its value. These are stocks I will be exploring more of:

• Glitter ETF (GLTR) - Gold, Silver, Platinum, Palladium
• Barrick Gold (ABX)
• ENSCO (ESV)
• Cheasapeake (CHK)
• Agnico Eagle Mines (AEM)
• Mariner Energy (ME)
• Ultra Petroleum (UP)
• Interoil (IOC)
• Platinum Groups Metals (PLG)
• Plains Exploration (PXP)
• Gold ETF (GLD)
• Gold Miners ETF (GDX)
• Petrobras (PBR)
• Suncor (SU)
• NovaGold (NG)
• Cobalt International Energy (CIE)
• PetroHawk (HK)
• Abraxas Petroleum (AXAS)
• Vale (VALE)
• Allied Nevada Gold (AMV)
• Exxon Mobil (XOM)
• Gammon Gold (GRS)
• Minefinders (MFN)
• ATP Oil & Gas (ATPG)

TIPS - no change here, this was a good call and inflation, while low now, should increase. Don't believe me check the FED minutes where they outright said they are looking for higher rates
Dividends - I like the recent stocks CLCT, IRM, RSG, EPD and other solid dividend plays.

As you can see I've got some work to do to find value for the future. Peace