There’s no such thing as a free lunch!
That’s the lesson for Ben Bernanke this week with markets continuing to question the efficacy of QE3. Or are they? Although global data continues to print on the poor side of neutral, markets are actually holding up reasonably well. Also, post-QE2 markets had their fair share of corrections but ultimately stayed on their upwards trends.
The market moves as much in terms of its expectations as it does what is actually happening. Hence, the conundrum of weakening data, correcting but still strong markets is complicated by what the consensus of the market thinks should be happening. After all, it doesn’t matter how bad data gets, if the market thinks it was going to be worse, prices rise.
This week we enter the conundrum once more with a range of new stock and trades ideas that at once recognise that central bank interventions, at home and abroad, still have the power to effect behaviour, even if that behaviour has changed. Michael Feller examines several gold stocks that are set to benefit from QE3 and a weakening Australian dollar on local rate cuts and Chris Becker looks at a range of gold juniors threatening to breakout.
Michael also digs into the long-ignored space of the building materials on the basis that the RBA will have little choice but to pursue policies aimed at stimulating new house building as the mining boom recedes and all of those “adjusted” construction workers head back home. And Chris Becker also examines how to hedge the bull and bear traps that the current conundrum presents. Greg McKenna takes a no-holds barred look at a Bendigo hybrid and Leith van Onselen completes his fabulous series on the fundamentals of Australia city house prices by tackling the minnows of Darwin, Canberra and Hobart.
As you can see below, portfolio performance this week was a continuing consolidation as the great conundrum works its way through.
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