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The End Of QE2-Quantitative Easing

Today, marks the end of quantitative easing part two. Quantitative easing (QE) is an unconventional monetary policy tool used by the Federal Reserve to stimulate the national economy when conventional monetary policy has become ineffective. Of course that doesn’t mean the there won’t be a QE3 and QE4. The policies of the Obama Administration have damaged our economy and I’m not surprised at the Federal Reserve for having to step in to try to save it. We’re in dire straits with the current economic situation, it’s hard to believe that we can turn things around in the next few years.

Watching the stock market in this past week would have others believe that we’re out of the woods and on the road to recovery. Instead what we’ve seen in the last four trading days is the smart money getting back into buying equities since the recent healthy pull back on the DOW. I’ve spoken about this before in detail of how when the markets or even good solid stocks pull back 8% from their recent high, you must “back up the truck” and load up for a strong rally that will be happening soon. Eight percent is a benchmark that I use to make decisions on when to jump into a stock or the overall market. Time and time again it has been useful and profitable for traders to follow this method.

If you’re new to investing in the stock market or have been around awhile, this is something you need to keep in your trading playbook. something else to keep in mind is when stocks or the markets move up 8%-10% in a short period, it’s time to unload some of your shares to keep the gains you just made. So far in the last four trading days, the DOW has gain nearly 4% from it recent low. Remember, pigs get slaughtered, so don’t be a pig and try to ride out the wave a little longer. Be happy with the gains you’ve made. Since emotions are not welcomed when trading stocks, don’t be mad or angry if you miss out on some profits because you jumped out too early. Stocks will always have a pull back and with the gains you made, you’ll have capital to trade another day.

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Precious Metal Prices Dip

The DOW didn’t start the week with a bang, but it picked up speed as the day went on. The DOW finished up today 109 points from it’s Friday close. Late in the day it was up over 150 points. The S&P 500 finished up 11 points which means the two indices are up today by nine tenths of a percent. The best of the big indices is the NASDAQ, finishing up 35 point (1.33%). The rally in the markets today was due to Europe’s announcement of optimistic look on Greece’s debt. Even though the gain was welcomed by many on Wall Street, the strength of the markets may only be temporary. Yes the dollar has gained strength, but lost some steam with the dollar index closing at $75.33 today. The Euro gained 0.6% against the dollar. If the Federal Reserve keeps printing money, it will lose even more of what it recently gained.

In the commodity sector, precious metal prices fall. Gold dips below the $1500 level, settling at $1496.40 per oz. and the price of silver also slipped back a bit to close at $33.59. It seems that many countries are lowering their concerns about inflation. The Chinese Premier Wen said the country’s inflation would be below 5%. With views like that, many see the haven of precious metal not being as needed or attractive as it is during poor economic times. At the current levels of gold and silver, they are both at their resistance levels. The 200 day moving average for gold is at $1415, which can signal a more downward slide in the commodity. So this is a good time to watch to see if the support level will hold. Analysts feel that this will all depend on what happens in Greece. Greece needs to prove that they are serious about their debt and how they get it in order. It’s the only way they will be able to receive any more bailouts from the IMF. If the latest measure fails and Greece can not get any more funds, then gold will continue to rise as more Europeans seek out to purchase more of the precious metal. If it goes the other way, where Greece does get the bailout, then stock markets around the globe should see a rise in trading.

Either way you look at it, precious metals, over the long haul will increase in value. I’ve been building a portfolio which holds 35% in precious metals. I do plan to scale out of it, but my opinion is that we’re not done with the economic woes. Politics have a lot to do with the news we’re hearing and I don’t have too much confidence in any government.

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Investments

I’ve been looking at the different industries and investment vehicles that are out there for the average investors. Depending on which types of investments out there, it may or may not be the time to invest. How can one know if an investment is right? Taking your time and doing the research to find out if it will be a profitable one or not. The housing market, the stock market or any other investment you have to choose from can be profitable, but unless you look at the real numbers and study everything there is to know about the investment prior to putting your money into it, you can lose most (if not all) of your capitol.

Yes housing prices are way down from their peak in 2006-2007, but that doesn’t mean that all housing prices are right for the picking. You need to look at the condition as well as the area the house is in. In some part of the country, housing prices may never reach the prices of just a few years ago.

What about the stock market? I don’t trust the stock market at this time since there is no reason for the DOW to be at where it is at the moment. Every month poor reports are being released (consumer confidence, unemployment and retail sales) and the stock market seem to either gains or holds it’s ground. We are in a terrible economic time and to think that the stock market will continue to hold is risky. The economic current events look pretty scary. If you’re looking to invest in the stock market, make sure you do your research into the company before you buy any shares. It’s the only way to know what stocks to buy now.

In my opinion, gold is the answer right now. I don’t mean stocks that trade off of stocks, I’m referring to actual gold. Gold as always retained it’s value or has gone up during trouble times like these. So when you invest, invest wisely.

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Is Now The Time To Invest?

During the last two years (2008-2010) we’ve seen the stock market as well as the housing market and financial institutions go through a very rough period of correction. Now in the second half of 2010, average investors are wondering if they should start investing again. Well it depends on what you’re going to invest in.

We are no where at there bottom or the worse of it yet, but at the same time I’m looking at many different investments I may want to get in on. I will say though that the stock market is not one of them at this time. In my opinion, there is no reason for the DOW to be over 10,000 and I do expect it to come back down below 9000. When I do not know, but it will be there in due time.

What about precious metals? There is only a limited amount of gold in this world and it’s one of the few things that will retain it’s value (if not go up) in our present economic condition. I’ve been building a portfolio of just different precious metals. If you’re looking to buy gold make sure you are buying actual gold pieces and not some paper stock that trades off of gold. Between the two, only actual gold will be worth anything when and if our economy crashes.

As for the housing industry, I suggest you take your time and look for solid and profitable deals. The housing market will not turn around any time soon so you will have plenty of time to find the right one for you. We will see foreclosures going on for years to come so prices will stay in the general area if not come down even more. As an investor, you will need to look at properties that will return to good value in five to eight years from now. The days of flipping houses are on hold and will be that way for some time.

Stay away from investing in any financial institution since they are still not sure of what will happen in time with all the government regulations that will be coming down the line. So is it time to start investing? Yes if you take your time and study what it is you want to invest in.

What happened to the stock market today?

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