Merkel + Bernanke + China = Buy Baidu, Sina, Ford

Includes: BIDU, F, SINA
by: Jason Schwarz

It looks like the European Ben Bernanke that we’ve been looking for is actually Ben Bernanke himself. The coordinated move by Central Banks throughout the world to lower the borrowing cost of dollars for banks was orchestrated by the maestro of confidence himself, Mr. Bernanke.

Bernanke realizes that this crisis is all about one thing: the banks. It you can secure the capital levels of banks, hedge fund bear raids won’t go anywhere near them. Hedge funds understand that they don’t have the firepower to fight the Fed. This move was enacted in order to stop bear raids on banks, period. Obviously the market cheered the move by rocketing up 490 points on Wednesday.

It looks like this window of opportunity between now and the Euro Summit on December 9th is a window that can be filled with optimism before it all comes crashing down again because of European inaction. With every day that passes it becomes more clear that Chancellor Merkel will refuse the eurobond/ECB solution until she can secure the necessary austerity of the other euro member nations. She is right in her thinking that true austerity can only happen in the 11th hour of a crisis, but she is wrong in her thesis that austerity is more important than confidence.

Thank goodness Mr. Confidence himself, Chairman Bernanke, stepped in before European banks began to fail. This newfound formula of short-term Bernanke mixed with long-term Merkel is a great one for markets.

In addition to the European banking news, the move by the Chinese government to reverse its year-long move towards tighter monetary policy is a big deal for Chinese stocks. Wednesday’s move to lower their banking reserve requirement will stimulate lending. The move is designed to rekindle economic growth and a slumping real estate market. China is no longer concerned with inflation and they are ready to jump start growth.

We’re ready to purchase longtime favorite (NASDAQ:BIDU) which is $35 off its high and Sina (NASDAQ:SINA) which is $80 off its high. We’ll look to add positions in both stocks today.

We’re also preparing to buy call options in an extremely undervalued Ford that is trading at a forward p/e of 6. A run between now and December 9th would make for a great holiday season. These kinds of European induced runs only seem to last until the next meeting. U.S. data along with Chinese easing should give investors plenty of reason to keep this rally alive.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SINA, BIDU, F over the next 72 hours.