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What Mr. Bernanke Got Right—Searching for Alpha for October 2012
When he started the first of three rounds of quantitative easing, Federal Reserve Chairman Ben Bernanke’s biggest assumption was that price pressure would remain low. That, he figured, would give his easy money strategies sufficient runway to jumpstart the economy without worrying about spiraling inflation.
Although it’s unlikely he thought three rounds of QE would eventually be needed, his inflation prediction was spot-on. And the recent crude oil “flash crash,” which has caused its price to drop below $90 per barrel, should give Fed fans even more comfort.
The global economy seems to be in a sort of virtuous cycle, as the weakness in Europe is preventing inflation, which is allowing the U.S.’s easy money strategy to heal the economy. Meanwhile, the government is borrowing more, albeit for free.
I expect this tailwind to prop up stocks throughout the fourth quarter.
About the Author
Ben Warwick, Quantitative Equity Strategies
Veteran investment strategist Ben Warwick brings 20 years of investment management expertise to AdvisorOne.com in his blog, Searching for Alpha. His market and economic insights provide readers with an insider’s view on generating alpha through asset allocation, the use of strategic portfolio “tilts” and alternative investments.
Ben Warwick founded Quantitative Equity Strategies (QES) in 2002 as a platform for implementing his quantitative investment strategies. The firm manages assets with traditional long-only equity and fixed income, private equity, managed futures and alternative investment mandates. QES has developed an industry leading expertise in building investment programs that can replicate alternative returns, while offering daily liquidity and transparency. These products include the HFRq, a hedge fund replication strategy developed in concert with Hedge Fund Research in Chicago; the Managed Futures Beta Index, with Aspen Partners; and the Nomura QES Modeled Private Equity Returns Index (PERI), which was developed with Nomura Bank and Preqin, the leading source of information in the private equity industry.
He is the author of several books, including "Searching for Alpha: The Quest for Exceptional Investment Performance," (Wiley, 2000) and "The Handbook of Managed Futures," with Carl Peters, (McGraw-Hill, 1996). He can be reached at ben@qesinvest.com.
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