Friday, September 14, 2012

QE3 - Ben Strikes Again

After months of careful signalling, the Fed's committee said it would buy 40bn each month of agency backed mortgage backed securities on an open ended basis and said it could extend those purchases and buy additional assets if the job market doesn't improve.  Unlike other QEs this one doesn't have a defined time limit and will continue until the labour market improves.  The market last night cheered this point and we saw a large 1.5% rise in the markets, and most likely to see some follow through tonight.

Now where do we park our capital in this current climate?  Obviously, Gold, Silver and commodities look good, then US banks, then Housing stocks.  I get the impression that tech might lag this rally.  Given the euro bond buying last week, and potential Chinese stimulus in the coming weeks; this looks to be a global effort to procure economic growth.

I've been offloading much of my leveraged portion of my portfolio in the last few sessions of gains; and was weary of the potential scope of the QE - it was much better than I had expected, and thus I was somewhat underpositioned for the rally.  However, given how bearish so many managers were going into the rally, I'm still going to have a large outperformance against the major benchmarks this quarter.