Fed Chairman Ben Bernanke finally succeeded and got the rest of the world to follow him down the rabbit hole of Quantitative Easing. Although I think this will achieve the same long-term economic success, or lack thereof, that QE2 did in the U.S., it should have some of the same short-term effects in the equity and credit markets that Bernanke’s move did here during the last four months of 2010.
- The high beta, richly valued stocks that Cramer loves to tout, and I love to short like Netflix (NFLX), Green Mountain Coffee Roasters (GMCR), OpenTable (OPEN), Salesforce, (CRM) etc….are no longer shortable as the liquidity enabled by yesterday’s actions will find its way into these momentum stocks along with other “risk on” sectors of the market. This even includes Lululemon (LULU), which is getting crushed today due a sales miss and poor outlook for the fourth quarter.
- Yields on the U.S. 10-Year Treasuries should rise due to the coordinated actions taken yesterday by the world’s central banks. A good bet to play this would be the TBT ETF, which rose 22.5% from Bernanke’s famous Jackson Hole QE2 speech through yearend 2010.
- Commodity and Energy stocks should be a primary beneficiary of this round of worldwide QE2 just like they were in 2010, especially given China’s moves to boost their lending. Here are four stocks that should be great bets over the next 3-4 months:
Price appreciation from Bernanke's Jackson Hole speech through year-end 2010: 29.9%
Forward Earnings: 8.5
52-Week High: $81.80
Dividend Yield: 3.9%
Price appreciation from the Bernanke Jackson Hole speech through year-end 2010: 78.9%
Forward Earnings: 8.2
52-Week High: $61.35
Dividend Yield: 2.7%
Hess Corporation (HES)
Price appreciation from the Bernanke Jackson Hole speech through year-end 2010: 53.4%
Forward Earnings: 8.9
52 Week High: $87.40
Consensus Price Target: $84.73
Rio Tinto (RIO)
Price appreciation from the Bernanke Jackson Hole speech through year-end 2010: 47.2%
Forward Earnings: 5.7
52 Week High: $76.67
Consensus Price Target: $92.84