Well, the line in the sand has been drawn. We should most likely expect low rates until early 2012, when the political climate is focused on the next presidential election.
This thematic pair trade should create absolute return in the climate created by the Fed. Consumer stocks traditionally suffer during periods of low rates.
As for the long side of the trade, as we discussed, the older generation will grasp for income and gravitate towards those names that produce it. MLP's and REITS fall into this category.
It is worth noting that traditionally successful coordinated trades have not worked for the most part during this bizarre year. My colleague, Kate Kelly's reporting on prop. desks support this as well as 2010 hedge fund statistics.
But if you listened to our special guest on The Strategy Session yesterday in Centerview Partners' Blair Effron, it is quite possible that the consumer continues to feel the pinch. If this is the case, this investment strategy could work for your portfolio.
As a final note, protective pair trades like this are not the only way to go in this environment. There are still big winners out there as single-stocks. Look for my latest induction into the "One-Decision Club" by the end of the week.
- Fed to Market: Long-Term Rates Can Go Even Lower
- Goldman Sachs May Spin Off Proprietary Trading This Month
- This Global Asset Company is Potentially Lucrative
- Video: Blair Effron
Programming note: "The Strategy Session," hosted by David Faber and Gary Kaminsky, airs weekdays at Noon ET on CNBC.
Gary Kaminsky does not hold any equity positions.
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