QE3 has arrived, sending investors into a stock buying frenzy. It's not too late to jump on the gravy train.
The Dow soared 206 points to the highest level since 2007. Shares of nearly 600 companies on the New York Stock Exchange and Nasdaq touched 52-week highs on the day, including Apple (Nasdaq: AAPL).
Buoyed by the forthcoming release of the iPhone 5, or by the company's still-modest valuation, or simply by hype and hope, shares in the world's most valuable company are closing in on the $700 mark.
The contrast with the ASX couldn't be starker, just 18 shares hitting a 52-week high yesterday. Still, Motley Fool Share Advisor subscribers were hopefully dancing all the way to the bank, as two (out of a total of 9) of our best-of-the-best recommended ASX stocks were on the list. Despite the price climb, we still rate both as buys.
Bernanke — All aboard the stock market gravy train
Ben Bernanke is hoping QE3, otherwise known as printing money, is once-and-for-all going to knock U.S. unemployment on the head.
We don't know how this one is going to end, whether Ben Bernanke will go down in history as the man who saved the American, and potentially the global economy, from The Great Depression Mark II. Or whether he'll go down in a screaming heap as the man who caused the biggest inflationary bubble since the last one.
But what we do know, for today at least, it's case of let's all get aboard the Ben Bernanke gravy train and ride it until the next stock market crash.
Save our iron ore
If only Bernanke could save iron ore, too…shareholders in Fortescue Metals (ASX: FMG) and Arrium (ASX: ARI) would be eternally grateful.
At least Fortescue shareholders won't have to endure any more pain for a day or two, as shares in "The New Force In Iron Ore" have this morning gone into a trading halt.
The company says it remains concerned about rumours and speculation. We reckon it should be more concerned about its massive debt burden. Perhaps Glenn Stevens can swoop in and announce the RBA is to buy iron ore for as long as it takes to save the mining boom, and Twiggy Forrest's fast dwindling billions?
Spend, spend, spend America
Back to Ben Bernanke and his Bond-Buying Bazooka…
As ever, our crystal ball remains cloudy. But this is an aggressive move by the Federal Reserve, keeping interest rates at near zero till 2015 and continuing to effectively print money until unemployment significantly improves.
If you are to believe the forecasts, U.S. economic growth will pick up to as much as 3.8% in 2014, and by 2015 unemployment will have fallen to between 6% and 6.8%.
Gold, stocks, money
The doomsters will fear inflation and pile into gold. The optimists will buy stocks and ride the recovery. The fence-sitters will leave their money in the bank, earning a safe but relatively pitiful rate of return.
When it comes to investing, worrying about what might happen is a futile exercise. Either you believe in the continued long-term wealth creation opportunities afforded by the stock market, or you resign yourself to a lifetime of worry, baked beans, bottled water and a nuclear bunker.
We exaggerate, of course. There's nothing wrong with protecting your money, and your wealth. As we've said umpteen times, in this low inflationary environment, and with the RBA cash rate at 3.5%, and predicted to fall, leaving your money in the bank and earning 5% interest is a decent investment.
A better bet than TattsLotto
Still, we suspect you might want a little more excitement for your money, the type of excitement only an investment in a risk-asset can bring — and we're not talking poker machines or TattsLotto — in which case you may want to consider buying shares.
Analysts agree the Australian sharemarket has delivered annual gains of between 9% – 11% on average over the past century — and that's before franking credits.
There's no reason to suggest that'll change any time soon — especially considering the events of that century, which included Depression, wars and countless booms and busts.
Is it really different this time? We struggle to understand why it would be.
When you least expect it, everyone will love shares again
A recent Consumer Confidence release said the proportion of respondents favouring shares stayed near record lows at 5.5%.
To our contrarian mind, we see that as cause for optimism, for if one thing is sure, like day follows night, when the ASX share market again rides high, as it will at some stage in the future, probably when you least expect it, many of those people sitting on the sidelines will pile back into shares.
Call us simple, but the time to buy shares is before the crowd piles in…like around about now.
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More reading
- Glistening: Gold price hits new highs
- Staying high: Aussie dollar rallies again
- Super is not so super
- The iPhone is here, thinner, lighter, yet bigger than ever
Motley Fool General Manager Bruce Jackson owns shares in Apple. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691).
