All those investors who liquidated stocks for bonds must be licking their wounds after the great reflation of assets was inaugurated this week. The Bernanke Bump, the well-orchestrated promotion of Quantitative Easing along with the debasing of the dollar have been driving commodities, emerging markets and precious metals into a frenzy.
The Bush tax cuts will survive. QE2 wasn't a surprise at all. But the better than expected results for Republicans in Congress prefigured an Obama compunction to compromise with his opponents. A very fiscally necessary surprise gift for investors.
The tax on the sale of stocks, bonds and other assets--what we call the capital gains tax--will remain at the at the historically low rate of 15%, as proposed by the George W. Bush administration in 2003, when the tax cuts were passed in order to improve the lot of investors after bear market of 2000-2002. In fact, the lower tax led to a greater number of transactions and far large tax revenues for Uncle Sam. For 2011 at least, and maybe longer, the capital gains tax will remain at 15%--not double or triple that, as the Obama administration was threatening.
So refocus your animal spirits on high-yield bonds (through the iShares High Yield Corporate Bond Fund ( HYG -- news -- people ), stocks that have a record of increasing their cash dividend for the past 25 years (the SPDR S&P Dividend ETF ( SDY - news - people )), and REITs that pay out a high percentage of their income in dividends.
Gold lovers must have woken up Thursday to celebrate QE2, a printing of more dollars with the purpose of driving the price of assets into the wild blue yonder. As a joyous occasion, Gold is still relatively inexpensive in comparison with the Dow Jones industrial average. If gold continues to run up, major gold miners like Randgold Resources ( GOLD - news - people ) could move up at a multiple of two to three times the price of bullion.
According to U.S. Global Investors ( GROW - news - people ), a mutual fund group in San Antonio, Texas, another, smaller gold holding that hasn't run up as much is Medoro Resources, a Colombian gold producer (MRS), according to Frank Holmes, U.S. Global's CEO.
In the metals area, copper producer Freeport-McMoRan Copper & Gold ( FCX - news - people ) has run up mightily since the summer, from $60 to $105, and is still selling at only 12 times earnings. A classic example of a stock you must hold for the big move: Its copper reserves are being funneled off to China ever more quickly and at rising prices.
Here's the November Irony to remember: QE2 seems a reward from Ben Bernanke to investors, speculators, gold and silver fanatics and the holders of currencies that rise as the dollar falls (Australia, Singapore, Korea, Brazil).