What To Watch In The Days Ahead
We’re rapidly approaching some important days and most likely important events. Most of these events surround the Federal Reserve and the conclusion of the quantitative easing process we’re currently engaged in, usually referred to as QE2.
Interestingly, the rhetoric is what you need to watch, because if you pay attention closely to what people are saying on CNBC and other outlets, the tone has already shifted slightly. This week we have seen weak housing numbers and weak job numbers (ADP report). Coupled with this, we’ve seen a massive drop in commodities mainly oil and silver.
So the rhetoric has been around a softening economy and around the idea that Bernanke might be right in calling inflation “transitory.” Surely, a three day drop in commodities prices mean Bernanke is right. I even heard Bill Griffin on CNBC say “and that is why Bernanke is Fed chairman and not us.” referring to his call on transitory inflation. Wow, now that is journalism.
So what’s the point? Well, the point is that this rhetoric can easily help set the stage for QE3. I don’t expect it to be announced immediately following QE2, but I do expect it to be announced at some point. If there is a fresh round of QE, all bets are off!
What the rhetoric closely. It will be subtle, but you can almost already hear the financial media giving Bernanke permission for more of the same printing. If you’re willing to bet on it, buy commodities during this dip. I think silver could correct all the way down to even $20 – if so, I’m going to back up the truck.
Sneak peak: I’m about to initiate my third Dividend Reinvestment Plan (DRIP). Currently, I invest monthly in DRIPs for MCD and WMT, and I have a third company I’m about to start moving on. This company is much different and has a market cap under $1 billion so you might be curious to see what company it is. More soon on this…