Battle Ground – QE3!

| April 3, 2012 | 0 Comments

Quantitative EasingIt’s with all due respect for my esteemed colleague Gordon Lewis that I challenge his take on QE3.  Now, I’ll be the first to admit, Gordon has a much stronger macroeconomic background than I.  But that doesn’t change the fact that he’s wrong on this one. 

Let me explain…

In his March 29th article, Gordon advised that QE3 could be back on the table.  He cited the persistence of housing issues, the European debt crisis, and soaring oil prices.  In fact, he thought these very issues contained the keys to unlock more quantitative easing… or QE3.

My challenge with Gordon lies in the interpretation of the economic data.  More to the point, I think he’s missing the 20,000 foot economic view, so to speak.

You see, the markets have been rallying in the absence of any real QE hype or propaganda.  None of the talking heads on CNBC are screaming “QE3 is coming, QE3 is coming… buy, buy, buy!”

Dangerously, they’ve done that in the past… and in the process, propagated an idea that QE is necessary for the markets to rally.

Based on the 2012 rally, we can see it’s not…

It’s seems fairly obvious, a hope for QE3 is not behind the market’s recent surge.  Instead, it’s the steady stream of positive economic data behind the rally.  And it’s great to see improving fundamentals doing the driving once again.

For months, we’ve seen the housing market pick up, consumer confidence grow, and most importantly… unemployment continue to improve.  In fact, the US economy added 227,000 jobs in February.  More notably, the initial jobless claims reading for the week of February 25th came in at just 351,000.

That’s the lowest level in four years.

With economic data trending in the right direction, and the stock market averages at multi-year highs, I can’t see why the Fed would decide to roll out another QE program.

To make my point, Dallas Fed President Richard Fischer came out Monday and spoke as if he heard my very thoughts…

“There’s so much liquidity in the system… Why would we add more unless we had a crisis on our hand or something was happening where we’re seeing significant slippage in the economy?”

Precisely my point Mr. Fisher…

I do agree with Gordon on one thing, the improving economy has been good to penny stocks so far this year.  As he pointed out, the Russell 2000 is up about 12% in 2012.

I simply think Gordon was looking at the latest handful of data points last week, instead of the 20,000 foot view.  From up here, things are looking better than at any time since the financial crisis hit a few years back.  Most of all, the pickup continues to bode well for penny stock investors.

Editor’s Note:  While I may disagree with Gordon’s stance on macroeconomic data, there’s no denying his prowess as a penny stock guru.  Click here to discover how Gordon has picked an amazing 12 consecutive winning penny stocks!

Until next time,

Brian Walker

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Category: Breaking News, Investing in Penny Stocks

About the Author ()

Brian joins the Penny Stock Research team as a seasoned independent trader and financial analyst. Brian graduated with a B.S. from the University of North Florida and now resides in Scottsdale, Arizona. With a background in economics and statistics, he has a keen ability to uncover profitable and growth-focused companies. He has years of real life know-how in analyzing fundamental and technical data that gives him an edge drilling down on companies and financial results. With over 15 years trading experience, Brian has become an expert in the ever-changing equities markets. Today, he scours the markets hunting for penny stocks that offer low risk and high reward.