As I wrote last week, the central bankers of the world are staging a monetary arms race to see who can pump more liquidity into the world economy. ECB President Mario Draghi and Fed Chairman Ben Bernanke have each taken turns upstaging the other.
Now, it's Japan's turn. The world's third-most-powerful central bank has joined the fight, launching a fresh round of monetary stimulus of its own. The Bank of Japan is expanding its asset purchase scheme by another 10 trillion yen to a full 80 trillion--or about $1.02 trillion in US dollars.
A CURRENCY WAR IS BREWING
I don't expect this to be the last shot fired. The ever quotable Guido Mantega, Brazil's finance minister, has reiterated his claim that the world is in a "currency war." He's also made it clear that Brazil does not plan on losing it, meaning that Brazil will resort to loose monetary policies too in order to prevent Brazil's currency from getting unmanageably expensive.
KEY QUOTE
What does any of this mean for investors? In an interview with the Financial Times this week, Mantega said that "risk aversion had fallen and animal spirits have increased."
GO ON SAFARI
I couldn't have said it better myself. Until the market shows any real signs of weakening, I recommend that investors maintain an aggressive portfolio. And right now, this would include frontier markets such as Africa and the Middle East. I recommend investors pick up shares of the Market Vectors Africa Index ETF (AFK) and plan to hold for the remainder of 2012. As always, use a stop loss that is appropriate for your risk tolerance.
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About the Author
Charles Lewis Sizemore, CFA is the founder and editor of The Sizemore Investment Letter, a monthly newsletter dedicated to finding superior investments backed by powerful macro trends. He also serves as the Chief Investment Officer of Sizemore Capital Management LLC, a registered investment advisor.
Sizemore has been a repeat guest on Fox Business News, has been quoted in Barron’s Magazine, The Wall Street Journal and The Washington Post, is a contributor to Forbes Moneybuilder.
He is also the co-author, along with Douglas C. Robinson, of Boom or Bust: Understanding and Profiting from a Changing Consumer Economy (iUniverse, 2008).
Sizemore holds a master’s degree in Finance and Accounting from the London School of Economics in the United Kingdom.
Prior to founding The Sizemore Investment Letter, Mr. Sizemore 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 and was a regular contributor to the HS Dent Forecast monthly newsletter and the HS Dent Blog—one of the most widely read financial blogs in the world.
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