Keith Fitz-Gerald Nails It on Today's FOMC Meeting

Email
    Text size

Almost every major news outlet predicted a taper coming out of today's FOMC meeting, but Money Morning's Chief Investment Strategist Keith Fitz-Gerald went on the record months ago correctly predicting there would be no taper.

The major news outlets were wrong, and Fitz-Gerald nailed it...

As a result, Money Map Report subscribers saw substantial gains of 100%, 61.76%, and more.

Fitz-Gerald repeated his call several times.

"The markets have become so addicted to cheap stimulus that I don't believe Bernanke has the guts to take his foot off the proverbial gas pedal," he wrote in a June Money Morning article.

And in late August, Fitz-Gerald appeared on CNBC World, where he stated that there's not a central banker in the world who has the guts to step away from quantitative easing (QE).

You can take a look at that video here...

"They are engaged in the oldest game in the book, which is just print money, print money, print money," said Fitz-Gerald of the U.S. Federal Reserve's QE program. "It's 'kick the can down the road'...like giving an alcoholic a drink and telling him it's going to cure him. I don't see how [the Fed] can possibly work this."

Indeed, the Fed could not "work it" - today's FOMC meeting ended with a release of the Federal Reserve's September statement announcing there will be no taper.

The FOMC will hold bond purchases steady until it sees more evidence of sustained progress.

Per the official statement:

"Some indicators of labor market conditions have shown further improvement in recent months, but the unemployment rate remains elevated...Mortgage rates have risen further and fiscal policy is restraining economic growth."

Thus, due to weak numbers, the Fed's $85 billion in monthly bond buying will continue, and, running with Fitz-Gerald's analogy, the alcoholic will keep on drinking.

Fitz-Gerald took a look at the weak economic numbers trickling in July and August, forecast there would be no taper, and accordingly positioned Money Map Report subscribers for some big gains.

"This is, in good part, why we've insisted on staying in large-cap stocks - our glocals," Fitz-Gerald said. "Yes, we'll see a taper tantrum in the markets at some point, but not now. The economic data is weaker than everybody wants to see."

Based on the premise that the Fed would decide not to taper in today's FOMC meeting, Fitz-Gerald advised that Money Map Report subscribers take positions in two key recommendations:

  • ProShares Short 20+ Year Treasure ETF (NYSE Arca: TBF), which resulted in gains of 100% and 61.76%; and,
  • PIMCO Strategic Global Government Fund (NYSE: RCS), which is still in play but already reflects total returns of 3.07%.

"While RCS is global in nature, you want the U.S. agency debt exposure you get in RCS because the Fed will be forced to keep its foot on the gas even though arguably it's absolutely the wrong thing to do," Fitz-Gerald explained.

Because of Fitz-Gerald's foresight, it's safe to say that the Money Map Report subscribers who followed his lead are pretty happy.

Down the road, Fitz-Gerald sees a taper as inevitable, but only when the numbers are right.

Of course, the market will react when that time comes...throwing what Fitz-Gerald refers to as a "taper-tantrum."

In its statement today, the FOMC said:

"When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent."

Trying to wean the U.S. economy off of the taper is a harrowing prospect (a big reason why all eyes were on today's FOMC meeting). Every time the Fed has stopped a QE program, the markets have tumbled:

Right now, Bernanke's printing presses are still running... but at some point, this must end.

We don't know exactly how much time you've got before Bernanke pulls the plug for good, but we do know it's inevitable, and when it happens, the markets will go into a death spiral.

That's why Money Morning's top experts put together a "safety plan" you can use to protect your wealth right away.

Related Articles: