QE3 Stock Plays
If the Fed decides to implement QE3, then investors should consider that the U.S. dollar is going to lose even more value that it already has, which should boost precious metals such as gold and silver and crude oil prices. Crude oil could see the biggest upside of a QE3 because it's priced in dollars around the world, and that correlation trade could accelerate. Let's not forget that if soft commodities prices go up again under a possible QE3, then it will mean more social unrest in oil-rich nations, many of which are already economic nightmares.
I am speaking mainly about the Middle East nations here, including Saudi Arabia, Libya and Iran. Any crisis scenario that hits oil-rich nations in the Middle East will cause oil to skyrocket. That's why you're not seeing oil boom right now due to the unrest in Syria -- it isn't a big enough oil player on the world stage to move the markets.If you want to position yourself for QE3, then wait for the SPDR Gold Trust (GLD), Oil Services HOLDRs (OIH) and the United States Oil Fund (USO) to pull back notably and then load up on some shares. The iShares Silver Trust (SLV) has already experienced a big pullback due to margin hikes by the CME Group (CME). Rare Earth Metals One other way to play more QE3 from the Fed is with rare earth metals stocks. This sector basically hits on three major fronts that would almost certainly benefit these stocks during a high inflationary environment caused by more quantitative easing: pricing power, strong demand and the perception of having a precious metal status like gold and silver. Obviously, rare earth metals aren't held in the same light as gold and silver, but that could change rapidly if the U.S. dollar were to break to new all-time lows during another round of a massive quantitative easing. The best-of-breed name in this space is Molycorp (NCO) with its $5 billion market cap. This company has a great balance sheet, with over $492 million in cash on the books and just $2.8 million in debt.
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