Tuesday, October 5, 2010
The Bernanke Put
You have heard me talk in the past of the Beijing put as relates to gold. The idea being that the gold price will not have a substantial correction because the government of China has encouraged its citizens to buy gold bullion. Therefore the Chinese government can and will step in to buy gold to interrupt any significant decline in gold prices. The idea behind the Bernanke put is that the US Federal Reserve is intent on not only holding up asset prices but forcing them up. This became evident in the last couple of weeks as we have watched all asset classes advancing in price. It now appears that the FED is intent on printing enough money to reflate the economy. Of course the consequence of this will be a weak dollar and a potential currency crisis, bu he will worry about later I guess. The point being is do not be surprised if the stockmarket has a nice surge into the end of the year. However I suspect oil, food, and commodities in general will also be going up. Check out this interview of billionaire hedge fund manager David Tepper and how he is trading the Bernanke put.