While the market shook around yesterday on the mere thought that the Fed won't come and give the drug addicts another hit, the bond king Bill Gross says there is almost no doubt it is coming and coming soon. I agree of course, as the Bernanke Fed loves to telegraph things well in advance and I can't remember such explicit "hints" such as this without follow through. In this interview with CNBC after the close he explains why and how to play it.
One interesting comment is some thoughts now that the next QE will be "open ended" i.e. there wont be QE4, 5, or 6 because the next one will just last as long as it takes. The one pitfall for such an idea is the fact that QE could lose a lot of its current luster in the marketplace because the Pavlovian effect is the "you can't lose" idea. That works better with smaller time frames. With an open ended QE, at some point the market will correct – perhaps sharply – and the whole idea that the market can't go down with Bernanke flooding us with money will be kaput. So when and if we see a new round of easing and if its "open ended" it's going to make the future even more interesting.
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund's holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog