The ECB finally announced QE yesterday and it was bigger than many expected. 60 Billion euro a month until December 2016 is a bold move by the ECB but Europe has come under pressure from the US’s response to the crisis. The US started printing money heavily since 2008 ( to the tune of trillions of dollars) and now has a healthy GDP of 5% and record low unemployment. Nevertheless I believe that all s now what it seems. The labour participation rate is down ( with now nearly 95 million people out of work). Also things like credit card defaults and car repossession are back at 2008 levels but these stories don’t make the news. This makes me believe that the FED can’t raise interest rates and wont. Europe’s QE has added fuel to the fire for all stock markets and consequently the US market rallied 31 points yesterday. I expect the US to announce QE4 this year which will probably take the S&P to 2500 and beyond…
How can investors trade these markets. I for one think this false recovery one day will be seen for what it is but until that day comes, we stay long stocks and long bonds in our portfolio. Gold has done surprisingly well since the turn of the year. It is encountering resistance at $1,300 and can’t seem to get through it so may get a temporary pullback. We are also long precious metals as I have learned that surprises happen on the upside. Every technical trader is waiting for Gold to fall ( as an eight year cycle low is due) but it may never happen. We shall see. Even if mining stocks fall, they are so oversold that this sector is not a bad place to be as long as you can ride out whatever comes your way..
To stay updated with my new trades and portfolio management, you can follow me also on seeking alpha. We have started this portfolio out with a $1,000,000. We now have near $400,000 invested. We use covered call strategies and we collect dividends. We will not be drawing money out of this account and I want to realize a gain of 15-20% for 2015 which would give us anything from $150k to $200k gains.
We do not use stop losses in our portfolio. If you cant handle drawdowns, then this portfolio is not for you. Why would you ever sell (NYSE:KO) when you see its long-term chart and it has raised its dividend for the last 50 years+ !!