About 200B more in QE2.. to go...most observers are saying there will be no QE3 as the US economy is no longer in an "emergency state". So what happens when the 100B/month of cash infusions stop? Will the 20 year implode? Will the US$ spike? Will gold plunge? Will the SP crash...or nothing? Opinions?
Not a prediction but here is a possible sequence of events I anticipate
to transpire this year.
QEII will end.
A liquidity crunch triggered by falling real estate prices (possibly
commercial as well as residential this time) will bring about a market
crash like it did in 2008. For commodities I expect silver prices
to suffer the most violent correction like a 25--30% drop. Pullback
of gold bullion prices would probably be modest while any spike
in US treasuries would be temporary and more short-lived than it
was in 2008. Bernanke will then be forced to launch QEIII. This joy
ride to global economic implosion will end in hyperinflation.
The best protection against the impending liquidity crunch is
obviously a cash position. If you are the brave type consider such
hedging tools as reverse index ETFs.
During the interim period between QEII and QEIII after the
major stock market indexes drop by about 20--25% buy
Canadian stocks with both hands. Focus on stocks in the
sectors of energy, utility, agriculture and precious metals.
I also expect to find values in Canadian REITs. Stocks such
as Boardwalk, Crombie and Northern Property REIT should be
core holdings in a model Canadian stock portfolio.
I may have to revise my bullish outlook on Uranium in light of
the tsunami disaster. Other than Uranium I will buy anything related
to energy. The whole world is going to have to live with a perpetual
energy crunch for much of the rest of the century.