The US government currently holds a huge debt pile. It amounts to 105% of GDP and will soon have to renegotiate an increase on the debt ceiling to avoid a default. As soon as the FED stops buying government debt, interest rates will dramatically increase and the government will press the central bank to continue buying debt. There are only two options available: reduce government debt through the adoption of an austerity package (as in peripheral Europe), or let inflation roll and alleviate government debt.

You already know what the decision will be. What can’t be known is the dimension of it. The best thing to do is to prepare a portfolio of stocks that do particularly well within inflation environments. Value stocks, which have stronger cash flows, are preferred over growth stocks, and precious metals are always a good hedge against inflation.

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The debate about the direction that monetary policy is about to take has been on the table for months. In fact, the tapering issue has been prominent since Ben Bernanke publicly stated that the FED would start cutting on the current asset purchase program, effective this year..The purpose of cutting this program is to completely […]

The Power Of A Bear Call Spread The current year has been very profitable in terms of stock market investment. Although there is are still over three months left to go, the S&P 500 is already rising around 19%. However , three months is plenty of time for the market to go even higher. On […]

While Ben Bernanke and all other FOMC members prepare another meeting to decide the future of monetary policy, the range of economic data to digest is huge. This could be a good sign that suggests a mild economic recovery. However, this recovery will lack enough enthusiasm to support the “tapering” decision that the FED would […]

Most novice traders usually trade options in a simplistic way. They examine a stock, evaluate if it’s going to rise or decline, and then they buy a call or a put option to explore the opportunity, preferable an out-of-the-money one to maximize potential profit and minimize initial debits. Unfortunately the prospects for a stock are […]