Article by Investment U
Yesterday, I wrote about a first-time-ever loophole the European Central Bank (ECB) uncovered last week that enables it to begin buying bonds directly from debt-plagued nations such as Spain, Italy and even Greece.
Better known as quantitative easing (QE), this is exactly what the U.S. Federal Reserve has done in America to prop up its economy since December 2008.
Now, regardless of whether or not you agree with QE programs don’t really matter.
What does matter is how the ECB and the Federal Reserve are going to manipulate their currencies to keep their economies alive and kicking over the coming months.
In a nutshell, the central banks want to see the euro appreciate against the U.S. dollar. They have as much as $1 trillion ready and waiting to flood the markets at any moment to set this trend in motion.
And that’s why today I’m following up yesterday’s broadcast with a few unique ways to play the central banks’ currency manipulating policies.
Weighing the Options
Of course, despite what’s likely to occur, three things can happen this week.
- The central banks completely leave the markets empty handed and no one gets any money.
- Only one of the central banks actually cranks up its printing press and buys up sovereign debt.
- Both of them engage in more QE.
Regarding the ECB president’s aggressive remarks last Thursday, option one would probably be a blow to his credibility and career.
That leaves options two or three. And both are likely going to create unique opportunities to profit, as the euro regains some strength against the dollar for the remainder of the year.
Looking Out for the Rest of 2012
Before we go any further, first things first… don’t even think about selling your stocks, as share prices going higher can easily outstrip the effects of a struggling economy.
Also, unless you already have a forex account and know how to trade currencies, I say steer clear. Instead, there is a much easier way to capture gains from the next round of QE that’s coming.
And that’s by putting your money into commodities like gold.
Granted, since last September the price of gold has fallen 20% from its all-time high. But now that central banks are talking behind closed doors about bringing new rounds of QE to the markets, gold is looking once again like a safe haven against their spending.
If you own gold bullion such as South African Krugerrands, American Eagles, or Canadian Maple Leafs, my hat is off to you.
Since dollars are set to drop in value, gold is your best bet to preserve value. Of course, not everybody has the means to buy gold bullion, though.
The next best thing?
Try gold ETFs.
The iShares Gold Trust (NYSE: IAU) and New York’s SPDR Gold Shares (NYSE: GLD) are two ETFs that trade in the United States and hold gold as their one and only asset.
Like it or not, the central banks are going to crank up the printing presses again very soon. It may not happen this Thursday. But it will happen again. And with gold prices significantly off its highs, there’s no better time than right now to prepare your portfolio accordingly for the short term.
Good Investing,
Mike
Article by Investment U
