Energy Trading (XOM) (COP) (CVX) After QE2

Even though shares of energy stocks like Exxon Mobil (NYSE:XOM), ConocoPhillips (NYSE:COP) and Chevron (NYSE:CVX) have been steadily moving up for months, post QE2 they still look good, even if oil prices remain level.

A large number of energy stock are priced on $90 oil. So if prices remain at or around $108 a barrel, they are still a buy.

Even though an increase in interest rates is considered a negative for stocks in most situations, in the short term that shouldn't have any impact, as the federal funds are still at about zero. A major tightening would have to occur to change the scenario for stocks.

Expectations are it'll be a slow process for interest rates to be raised by central banks, so there's little chance of surprises there.

James Dailey, chief investment officer of TEAM Financial Managers, said, "The damage has been done. We have seen a pickup in the inflation cycle," said Dailey. "It is not just the Fed pressing the accelerator. It is the Bank of Japan and the European Central bank. I don't think there is going to be any draconian tightening anywhere."

"Even if we see tightening, that is no reason to not own commodities. Central banks will be behind the curve. You can get corrections based on it being overbought now but the fundamentals are intact. Unless there is a global recession or one or more central banks find religion and develop a Volckeresque appetite for monetary tightening, we see negative real yields."

As for energy stocks, they should continue to do well.

Post QE2 Trading with (MSFT) (DELL) (HPQ) (WMT) (PG)

As QE2 winds down plays that look the best continue to be commodity-based companies and blue chips stocks with low valuations.

The latter group would include companies such as Microsoft (NASDAQ:MSFT), Dell (NASDAQ:DELL), Hewlett-Packard (NYSE:HPQ), Wal-Mart (NYSE:WMT) and Procter & Gamble (NYSE:PG).

Some companies, to give an example, which wouldn't fit into that scenario wold be Caterpillar (NYSE:CAT) and Deere (NYSE:DE). It's not that they're not great companies to hold, just that they have most of the optimism already priced into them. The assumption for some investors with them is they believe the profit margins will remain strong at the two companies, which isn't a surety in any way. They've become risky at these levels.

The reason blue chip stocks like those listed above are a solid bet, is as mentioned, the current valuations, but also the ability of the larger companies to be able to pass on higher costs of inputs.

Bill Gross Irresponsibly Calls for More Stimulus

PIMCO's Bill Gross, who has been dubbed the "Bond King," isn't convinced Federal Reserve Chairman Ben Bernanke has it right when he said last week when testifying before Capitol Hill that ther is "increasing evidence that a self sustaining recovery in consumer and business spending may be taking hold."
Rather he sees the American economy as being unsustainable, and incredibly, rather than calling for the government to get its financial house in order by starting to shrink itself, he's calling for even more stimulus going forward.

Gross says in an interview, "I suspect that it's not as self-sustaining as they think. I suspect at we're not standing firmly on our own two legs and that ultimately we're going to continue to need some stimulation from the government."

"Basically the U.S. is not saving enough money to replace its own capital from the standpoint of depreciation and potential investment," added Gross, who said the greatest long-term threat to the American economy is the negative net savings rate of 1-2 percent.




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Alcoa (AA), Verizon (VZ), General Electric (GE) Pull Dow Down

Verizon Communications (NYSE:VZ), Alcoa (NYSE:AA) and General Electric (NYSE:GE) are weighing on the Dow, as all three in earlier trading were down by over 2 percent or close to it, although they rebounded slightly since them.

Stocks in the U.S. dropped in response to the continuing upward surge in oil futures, along with Federal Reserve Chairman Ben Bernanke comments.

The Dow Jones Industrial Average wasn't the only index falling, as the Nasdaq and Standard & Poor's 500 were down as well.

Bernanke hinted this phase of quantitative easing may be the last, as he sees economic growth as probably being self-sustaining.

Some see this as a negative, but most should be glad that Bernanke is even thinking about turning off the digital printing presses, as over the long term that is more harmful than the rest.