Tags: fed | economy | us | stimulate

Don’t Be Fooled: The Fed Will Stimulate the Economy

By    |   Saturday, 09 Jun 2012 11:57 AM

Have you ever tried to “keep someone guessing” about something so that there would still be a bit of a surprise and “shock factor” when they really found out about it? People do this all the time when it comes to birthday gifts, where anniversaries will be celebrated, etc.

Well, the Federal Reserve is attempting to do this very thing right now. They don’t want it to be “a given” that they are going to have to stimulate the economy. They want there to be a bit of “shock value” there when they finally roll into town with both guns blazing.

So on Wednesday, the market seemed convinced that it was a given that the Fed would institute some form of QE3 program. Then the very next day, Ben Bernanke testified and led the market to believe that it’s not a given and that even if it does happen, it doesn’t have to happen as quickly as the market thinks they will.

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But I’m here to tell you that they have no choice but to stimulate the economy.

Not only does the U.S. depend on it right now…but the whole world could use the help right now too.

Don’t get me wrong. I’m not saying that this is the “right thing” to do. I’m just saying, from their vantage point, they’re going to feel like they have to stimulate the economy again. Why? The world is hurting. How do I know? Let’s look at the manufacturing data from all over the world.

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Look at how much “red” there is above. That means that the manufacturing numbers for those countries came in worse than last time.

Let’s put it into perspective: 18 out of the 23 (78 percent) countries listed above have lower manufacturing (PMI) numbers. 14 out of 23 (61 percent) of them have contracting manufacturing sectors. (A reading below 50 means that the sector is contracting. A red number above 50 simply means that the growth of the manufacturing sector is slowing down.)

So only five of the 23 (21 percent) countries seen above are up (growing more presently than the previous month).

But there are other factors that prove that the global economy has slowed down. Oil isn’t trading at $115 a barrel anymore. It’s been trading in the low-$80’s. Why? It’s because the demand is backing off of the supplies of oil.

So can the Fed just sit back and choose not to stimulate the economy? I say they feel that they can’t just sit back and do nothing. Therefore, they will be stimulating the economy.

What’s the outcome once they stimulate the economy (or when the “cat is out of the bag” that they will do so)?

Gold and silver will rise as the dollar is diluted once again. The end of the recent dollar rally will push commodites up all over the place actually.

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Some stocks will soar as well but commodities will perform much better. But that’s not all. The risk-on foreign currencies will come back to life again too. This includes most every major currency exept for the dollar, yen and Swiss franc.

Therefore, we’ll see rallies in the Australian dollar, New Zealand dollar, Canadian dollar for sure. And we’ll even see a lift come to other currencies like the British pound and yes, even the euro for now.

So how can you position yourself to profit? Do like I’m doing with my Ultimate Wealth Report subscribers … buy up assets that benefit from the rise of commodities and foreign currencies. That’s what we’re doing and we’ll continue to do.

The dollar is beginning to decline again and “real assets” are beginning to rise again. So now is the time to position yourself to profit from it. The defensive, risk-off party is over for now because the “smart money” sees through the Fed’s smoke screen. They’ll be doing the very same thing I’m encouraging you to do now.

So don’t allow your wealth to be eroded as the Fed dilutes your dollars and stokes inflation. Do something about it. Be proactive by taking positions in the market that will benefit from the rise of inflation and the watering down of the buck.

About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of Ultimate Wealth Report. Discover more by Clicking Here Now.

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2012-57-09
Saturday, 09 Jun 2012 11:57 AM
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