On Demand

ETF Play: Bernanke Just Threw Gasoline on the Fire

Last week, I recommended that investors embrace risk (see "Reaching for Risk? Try Emerging Markets ETF").

European Central Bank president Mario Draghi had just pulled out all the stops, announcing that he would engage in as many "outright monetary transactions" as it took to force the yields of periphery debt to sustainable levels. Equity markets around the world rallied hard, with riskier, high-beta sectors benefitting the most.

This week, the market-moving news came from this side of the Pond. In what you might call a monetary arms race, Fed Chairman Ben Bernanke fired a bazooka even biggest than that of Mario Draghi. Bernanke announced the Fed would be pumping $40 billion of liquidity per month into the financial system for as long as it takes until he saw an improvement in the economy.

To use a poker analogy, the two most powerful central bankers in the world have officially gone "all in," and they are most certainly not bluffing.

Whether their moves make much of a difference in the real economy remains to be seen. But for investors, the new round of easing means one thing: a rally in virtually everything.

For the remainder of 2012, I believe an investor could throw a dart at the Money and Investing section of the Wall Street Journal, buy whatever security the stock landed on, and still earn a decent profit.

The last two quarters have favored staid, conservative dividend-paying stocks. While I still believe that these are the best choice for a core, long-term portfolio, I expect these to lag their junkier and higher-beta peers.

My recommendation? Risk it up with shares of the ProShares Ultra QQQ ETF (QLD).

QLD is a leveraged version of the popular PowerShares QQQ, which tracks the Nasdaq 100 index. If the QE3 rally continues to build steam, investors could see a quick 20-40% gain in this ETF.

Investors should be careful here. QLD is volatile, and standard risk control rules should apply. I recommend a 20-percent trailing stop.

Read our daily Markets section for more trading ideas.



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About the Author


Charles Lewis Sizemore, CFA, founder and editor of Macro Trend Investor (formerly The Sizemore Investment Letter), is dedicated to finding superior investments backed by powerful macro trends—before you hear about them on the nightly news or read about them in the newspaper or on the Internet. He has been a frequent guest on Bloomberg TV and Fox Business News, has been quoted in Barron’s Magazine, The Wall Street Journal,and The Washington Post and is a frequent contributor to Forbes Moneybuilder, GuruFocus, MarketWatch and InvestorPlace.com.

Charles is the co-author of Boom or Bust: Understanding and Profiting from a Changing Consumer Economy (iUniverse, 2008); and worked alongside best-selling financial author and economic strategist Harry S. Dent, Jr. in creating original research on the effects of changing global demographics on asset returns and economic growth. He also serves as the Chief Investment Officer of Sizemore Capital Management LLC,  a registered investment advisor.

His academic and real-life experience has given him a unique approach to investing: combining his insights into global macro trends with in-depth investor research. And he has developed a reputation for taking complex issues, recognizing long-term investment strategies, and then finding the hidden investing opportunities that he shares with investors.

Charles holds a master’s degree in Finance and Accounting from the London School of Economics in the United Kingdom and a Bachelor of Business Administration in Finance with an International Emphasis from Texas Christian University in Fort Worth, Texas, where he graduated Magna Cum Laude and as a Phi Beta Kappa scholar.

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