Last week Nouriel Roubini, known as Dr. Doom for his gloomy outlook on the global economy, made a comment concerning the rumored third round of quantitative easing. Roubini commented that if Friday’s job numbers were positive, then the Fed would be able to wait, but weakness would mean QE 3 by December if not earlier. Though the unemployment rate dropped to 8.1%, it was because of a dip in the labor force, not because of any meaningful gain in jobs, pointing to more weakness in the American economy. By Roubini’s standards, that would mean that QE 3 may be hitting the markets sooner rather than later [for more economic news and analysis subscribe to our free newsletter].
It has been one of the most widely debated topics in the past few months, as every investor and analyst has been quick to weigh in on their opinions for whether or not a QE 3 will come and if it will do any good. Some, like Jim Rogers, believe that QE 3 is already happening and has simply not been announced yet. Others feel that Bernanke may announce a QE 3 to help stimulate the economy to help Obama win the election given that Mitt Romney has been relatively vocal about his intentions on replacing Bernanke at the helm of the Fed. But with no material announcement from the Fed to date, the issue still divides many.
Roubini went on in his predictions to state that “by the fourth quarter, with the fiscal cliff coming and firms becoming more cautious, capital spending is slowing down and growth will be not even 2 percent”. He also predicted job growth to settle around 100,000 or slightly higher for the next few months before dropping out towards the end of the year. But things were even worse than he forecasted, as last month saw just 96,000 new jobs added, less than the expected 100,000. With employment figures growing worse, it seems that Roubini’s perfect storm is quickly beginning to unfold [see also Peter Schiff: The Only Way To Fix The Economy Is To Let It Fail].
For those looking to profit from QE 3 there are a wide variety of options that can be utilized. It is generally agreed that gold prices will see a hefty jump, making the SPDR Gold Trust (GLD) a prime option. The fund is the second largest ETF in the world and invests in physical gold bullion, although there is a fair amount of controversy as to whether or not GLD is a fraud. Oil prices would also see a short term spike on the announcement of more easing, so trading crude futures could be especially lucrative if and when easing finally does hit home.
Disclosure: No positions at time of writing.