And just like they did for her predecessors, the markets hung on every single word.
Except in this case, nobody (and I mean nobody) expected any major fireworks. What they were looking for instead was a confirmation that it would be "business as usual."
To continue reading, please click here...
What the Fed Taper Means for Markets and Your Money
I didn't think it would happen, but Fed Chairman Ben Bernanke up and did "it" a few minutes ago.
He announced the "Fed taper" - the Fed will cut its bond buying by $10 billion a month (to $75 billion) beginning in January.
I think there are a few points to consider about Bernanke's move. I want talk briefly about those, and then highlight what this news of a Fed taper means for your money.To continue reading, please click here...
- Janet Yellen's Testimony Didn't Intend to Reveal This Profit Opportunity When Janet Yellen testified before the Senate last week, she inadvertently let slip a major clue as to where the real money will be made over the next year or so. And we're not talking about the record stock market highs, either. Knowing how to interpret this single phrase is the key to unlocking a $2.5 trillion market. Here's what Janet Yellen said...
Deflation Is Coming (and It's Not What You Think)
Be careful out there.
The stock market rally that started in March 2009... The one that's taken us out of the Great Recession and to new highs... The rally that's driving sentiment indicators of people who benefit from rising financial assets directly, peripherally, or because they hope all boats rise with the market...
The rally has never been loved.
The thing is, equity markets don't need love to go twice as high from here, or three times as high in the next 20 years. If they get what else they need, they'll keep going higher.
We could be on the verge of a generational bull market. That's if deficit-plagued, interconnected global sovereigns deleverage and, at the same time, re-capitalize middle and rising classes by making "recourse-sound" capital available and simultaneously reconstituting entirely the notion of taxation.
Too bad the likelihood of that happening is somewhere between slim and none.
That's one reason why I'm an increasingly reluctant bull.
But there's another reason too.
And it has to do with deflation...
How the Fed QE Taper Will Affect Foreign Markets
Hints from the U.S. Federal Reserve this week that the quantitative easing taper is near ruffled feathers on Wall Street last week - but the idea of less Fed stimulus has caused much more turmoil in certain overseas markets. Here are the places getting hit the hardest.
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- Brace Yourself: This Is What the Fed’s QE Has Done for Our Economy Along with the Fed's easy money policies came bright promises of an economic recovery. Glancing at some recent headlines, you might even think the Fed succeeded... but why not take a deeper look into the mainstream media numbers and decide for yourself?…Read More...
FOMC Meeting: Look to Statement for QE Clues
Don't expect a definitive answer from this week's Federal Open Market Committee (FOMC) meeting on when the Fed will begin tapering its massive quantitative easing program.
Instead, the focus will be on the FOMC's statement, which will be scoured for clues about when scaling back QE3 could begin.
"We do not expect any modifications to the asset purchase pace or forward guidance at this meeting, so markets are likely to hang on every word change in the statement," Michael Hanson, an economist at Bank of America Merrill Lynch Global Research, said in a research report.
This month's FOMC meeting is the last before September, the month the markets have been expecting the Fed to announce "the taper."
Brian Gardner, senior vice president of Washington Research at Keefe, Bruyette & Woods, said the economic outlook will be key to finding taper clues.
"We do not expect any changes in policy (either for large-scale asset purchases or for Fed funds rates) but the commentary on the state of the economy could be significant," Gardner said in a research note. "As Fed officials have recently reinforced their intent to look at the outlook for the labor market and the economy, any change in the Fed's description of the economy could provide a better idea of when the Fed might taper asset purchases."
But, Gardner added, "Our guess is that any change in language will be nuanced and keep the markets guessing about when the Fed will taper."
He said Friday's jobs report may ultimately be as significant as the FOMC statement in terms of gauging when tapering would take place.Read More...
- Esther George on Why It's Time to Begin Adjusting QE Esther George, Kansas City Fed President, is a hawk among doves. Here’s why she’s concerned about what’s ahead for the economy, thanks to QE. Read more... Read More...
Your Best Strategy for Playing This QE Rally
Even as stocks and bonds continue to digest the concept of rising rates and the end of quantitative easing, there are still some great opportunities to land some big gains before any real trouble hits the markets.
QE may be fading away but that doesn't mean you can't profit... Read More...
Why We Won't See the End of QE for a Very Long Time
The more than $2.5 trillion that the Fed's bond-buying program - known as quantitative easing, or QE - has pumped into the financial system is credited with fueling the current bull market.
But while you can't blame investors for getting nervous at the thought of the end of QE, there's really nothing to worry about.
In fact, the Fed's policy-setting FOMC (Federal Open Market Committee) is now caught up in a trap of its own making - something known as a "liquidity trap." It happens when easy money policies like the Fed's zero interest rates and QE still fail to get people and businesses to spend money.
The trap is that you can't reverse the policy without discouraging spending even further, threatening to push the economy into recession (and spooking the markets, as we saw last week), while continuing it will remain ineffective.
"The biggest fear of the Federal Reserve has been the deflationary pressures that have continued to depress the domestic economy," Street Talk Live radio host Lance Roberts wrote in a recent column. "Despite the trillions of dollars of interventions by the Federal Reserve the only real accomplishment has been keeping the economy from slipping back into an outright recession."Read More...
- Why the Fed's QE Policy is Bullish for Oil Prices As the Fed tries to support bond prices, its added liquidity will spill over into commodities and boost crude oil prices... Read more... Read More...
What to Do Now as the End of QE Nears
If investors needed a reminder that global stock market rallies have been goosed by the Fed's lose monetary measures, they got it.
On Wednesday, U.S. equities went on roller-coaster ride.
The Dow Jones Industrial Average, up 155 points before FOMC Chairman Ben Bernanke said the Fed could soon begin to tap the brakes, ended the day down 80.41, or off by 0.5%,.
The uncertainty of when the Fed would begin to wind down its $85 billion-a-month in asset purchases sent investors to the sidelines in a hurry.
"This is a very sensitive market and particularity sensitive to any notion that tapering will come too soon," Quincy Krosby, market strategist at Prudential Financial in New York told Reuters.
"No one wants to be selling if the data reaches the point when the Fed begins to specifically talk about tapering. The market doesn't wait for the Fed to move. It will move before. That's how it operates," Krosby continued.
Of course, we knew QE couldn't really last forever. So what should investors do?..Read More...
The New Crisis Warning Just Issued to the Federal Reserve
Before the housing market crash, economists warned that record low-interest and mortgage rates were fueling a housing bubble.
Unfortunately, those fears were both overlooked and underestimated.
Now, an advisory council to the U.S. Federal Reserve is warning the Fed that its record $85 billon-a-month stimulus and ultra-low interest rates are fueling new bubbles in student loans and farmland.
"Recent growth in student-loan debt, to nearly $1 trillion, now exceeds credit-card outstandings and has parallels to the housing crisis," according to minutes of the council's Feb. 8 meeting.Read More...
In addition, "agricultural land prices are veering further from what makes sense," the council said. "Members believe the run-up in agriculture land prices is a bubble resulting from persistently low interest rates."
- What You Absolutely Need to Know About Money (Part 6) How did stodgy traditional banking morph into “casino banking” on a global scale? Shah Gilani explains the crooked path to where we are today… Read more... Read More...
There's More Than One Way for the Fed to End QE
The market has been looking ahead to the inevitable end of the U.S. Federal Reserve's quantitative easing (QE) program with considerable apprehension.
Most market observers expect the end of the Fed's QE asset-purchasing program to immediately result in a sharp sell-off in bonds and higher interest rates.
This is expected to hit the mortgage-backed securities (MBS) market, where the Fed has been very active, quite hard.
As part of a policy to communicate more openly with the markets, Chairman Ben Bernanke and the Fed have been regularly launching QE exit strategy trial balloons into the market to see how quickly they get shot down.
The latest exit strategy that has been gaining traction is the idea of "tapering" QE asset purchases so that there isn't a sudden halt to supply of money flowing from the Fed into the Treasury and MBS markets. The markets seem to be pretty sanguine about the tapering idea, although there has been no specific suggestion on timing.
Instead, the markets have been concentrating on how the Fed will get rid of all of the assets it has accumulated on its balance sheet during the QE program.Read More...