Battle Ground QE3!
Its with all due respect for my esteemed colleague Gordon Lewis that I challenge his take on QE3. Now, Ill be the first to admit, Gordon has a much stronger macroeconomic background than I. But that doesnt change the fact that hes 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 hes 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, theyve 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 its not
Its seems fairly obvious, a hope for QE3 is not behind the markets recent surge. Instead, its the steady stream of positive economic data behind the rally. And its great to see improving fundamentals doing the driving once again.
For months, weve 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.
Thats the lowest level in four years.
With economic data trending in the right direction, and the stock market averages at multi-year highs, I cant 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.
Editors Note: While I may disagree with Gordons stance on macroeconomic data, theres 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
Category: Breaking News, Investing in Penny Stocks
