This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

QE3 Isn't Coming This Summer -- Buy These 4 Stocks Instead

BALTIMORE ( Stockpickr) -- QE3 isn't coming for investors -- at least not yet. Here's why you shouldn't care.

There's been a lot of talk about QE3, the nickname for the Fed's next projected round of monetary easing. Put simply, it's a program where the Fed starts buying financial assets in an attempt to stimulate the economy. While the idea of QE3 was unthinkable in the first few months of 2012, it became a big buzzword again as soon as Mr. Market crapped out in April.

So what's wrong with the Fed swooping in to save stocks? For starters, that's not what the Fed cares about.

>>10 Low-Risk Dividend Stocks for a Volatile Market

Lots of people think that QE3 is going to come about as a reaction to poor performance in stocks, or real estate prices, or jobs numbers. But the third round of quantitative easing isn't some shot in the arm that gets administered when stock prices are struggling. Sure, Ben Bernanke does plenty of hand wringing on TV about tough stock markets when he speaks to congress or to the media, but there's only one metric that the Fed is trying to control directly with QE3: inflation.

The Fed has publicly said that it's trying to target a 2% inflation rate. But again, that's not really what's going on. Instead, they're just trying to keep inflation above that 2% low water mark. And when the inflation meter goes too low, Bernanke and company just dump a bunch of cash into the marketplace.

>>ACTIVE STOCK TRADERS: Check out Stockpickr's special offer for Real Money, headlined by Jim Cramer, now!

For the last couple of months, since the QE3 talk reemerged, I've been watching the Fed's 5-Year Forward Inflation Rate. It's a number that basically works out the inflation rate that's being priced into the Treasury's TIPS securities, and for the last few years, it's predicted QE like clockwork.

Here's the key: Every time forward inflation dips below 2.2%, we get another round of quantitative easing.

First, it happened back in late 2008, when inflation slid below 2%. In mid-2010, the Fed caught it earlier, not letting the number dip below that 2.2% level before announcing QE2. And it happened again in September 2011, when the Fed announced Operation Twist in what was effectively a QE3-lite. Each time that number has tested 2.2%, the Fed announces a new monetary easing program.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
AUY $4.55 -3.40%
GLW $18.62 -1.01%
NEM $33.83 -1.49%
TAP $98.31 1.59%
AAPL $95.18 1.64%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs