Tuesday, November 2, 2010

My QE2 expectation

US Federal Reserve Chairman Ben Bernanke is expected to announce QE2 tomorrow (November 3rd).  My expectation for QE2 is an announcement of US$80 billion to US$100 billion per month, totaling no more than US$900 billion.  More importantly, I expect Ben Bernanke to promise further action if needed when QE2 expires.  He may even state an estimate for the total amount for QE2 and QE2+/QE3, though that is less likely.

While QE2 will be much smaller than the US$1.75 trillion QE1, investors should not underestimate the willingness of "Helicopter Ben" (Ben Bernanke's nickname) to conduct quantitative easing.

As a result of cheap money due to QE2, I expect US equities to rally 10% sometime within the next 3 months.  In addition, I expect gold to continue to rally, surpassing its October record high of US$1,387/ounce.  In fact, US$1,400/ounce is an easily achievable level for gold before the end of 2010.  My estimate is for gold to hit US$1,430/ounce by the end of 2010.    

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