The Bernanke Put: The QE2 Rally and Why I'm Over It
The tired rally in stocks that is simply coming from the increase in money printing and supply of more debt and leverage into the system is getting really boring and mindless. Stocks are not cheap, executives are not anymore shareholder friendly than in 2008, and nothing has been done to fix the system so that the same type of crooked nonsense is not repeated in financial markets. With that said, all we have done so far was to paper over the problems in the short run by applying Band Aids and poking fingers into the holes in the leaking dam that is the U.S. Government and the United States Dollar.
The Chicken and the Egg politics are not fun for anyone, and it appears that the Republicans are not serious just as much as the Democrats don't understand compounding interest rates on debt coupons. Gold is the big beneficiary right now and the "money" metal is climbing to new highs as I write this. Investors in the Silver Bull market that I have been writing about for almost a year have made tremendous gains and commodities in general have risen more than stocks -- so for the average American was QE2 "good"? I would argue that QE2 was absolutely not good for the working man while benefiting the rich.
That being said, the Ryan Plan and Obama's Plan are both likely unworkable, but at least Obama's plans recognize poverty and suffering as a more than a line item in the budget. Cutting taxes for the people making millions a year is just too Banana Republic at this juncture, and I am surprised that the Ryan plan argues for more tax breaks. Obama will likely seize massive support from not caving on more tax breaks, as these moves were highly unpopular with the 45% of Americans who aren't paying taxes this time of year, as sad as that fact truly is, it's a fact.
The QE and debt party stock rally will likely come to an end soon, and then when we have run out of options, I hope the idiots in government have a new solution for what ills us -- maybe we can cut elected official pay and ban campaign funding altogether and do things the way they should be done -- via the number of Facebook friends one has, lol...
In the end, politics, just like today's markets are pigs with a lipstick plastered smile... You want to avoid both at all costs, but since we have to save some money for what's coming next, the time to be cautious is in front of us... Hedging your stock and even bond positions seems prudent and owning some farmland or gold coins also does not seem so dumb from a financial perspective. Shares in high flying tech stocks like BIDU at 95X earnings and 37 times revenues. Long term investments are not made in companies at 95X earnings but speculations however are what we call investments in companies that are markedly overvalued like the Russell 2000 (IWM). Investors should view speculation as good s, however, are not only in bull markets and not in bear markets or bull market tops.
Happy investing
Disclosure: I am short IWM, BIDU.
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