QE

Here's What Rising Rates Really Do to Your Shares

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There is a lot of lip service being paid to the upcoming stock market crash that we're supposed to expect once the Federal Reserve starts raising rates.

Every time we get close to a regularly scheduled Federal Reserve statement, financial pundits pontificate about the nuances of what the Fed Chair might say, not say, or imply.

It's like clockwork.

But one theme remains constant: any tightening of the Fed's easy monetary policies will spell impending doom for the easy-money-addicted stock market.

The only problem, though, is that historical facts just don't support the fear. In fact, there are opportunities for investment out there no matter what rates do... Full Story

Fed Policy Failures Leave $10.8 Trillion Under the Mattress

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Despite billions in bond-buying "quantitative easing" and near-zero interest rates courtesy of recent Fed policy, Americans have stashed $1.8 trillion in low-yield accounts since the QE program started in 2008.

It's a failed stimulative policy that has left a shocking $10.8 trillion on the sidelines. But when it comes to investing in stocks in particular, the news gets even worse.

This trend is truly ominous…

Why Interest Rates Matter… and What Happens When Markets Diverge

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In my last column, I explained why you should always keep the bond market in mind, because stocks and bonds are inextricably interconnected.

They're inextricably interconnected because interest rates matter.

When expected relationships between stocks and bonds (interest rates) diverge, it's important to take notice and consider what it could portend for both stocks and bonds.

Here’s why the current market divergence has a lot of analysts worried…

Janet Yellen Sticks to the Script (Here's What It Means for Investors)

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Janet Yellen made her debut before Congress Tuesday as the new head of the Fed...

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."

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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.

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Janet Yellen's Testimony Didn't Intend to Reveal This Profit Opportunity

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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...

BREAKING: Bernanke to Continue Controversial Bond Buying Program

Fed Chairman Ben Bernanke announced in a press conference this afternoon that the U.S. Federal Reserve will continue quantitative easing, the controversial bond buying program, for now. Chairman Bernanke expressed concern over rising borrowing costs and their effect on the economy, saying that the situation calls for continued quantitative easing.

Analysts on and off Wall Street were surprised, to put it mildly. Markets responded very well to news of continued easy-money policy. The mainstream consensus was that the Fed would begin to taper off its $85 billion monthly bond purchases by around $10 or $15 billion each month. Current pricing just didn't take continued bond buying into account, and the bullish reaction was immediate, intense, and widespread.

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FOMC Meeting: Look to Statement for QE Clues

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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.

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Why We Won't See the End of QE for a Very Long Time

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When U.S Federal Reserve Chairman Ben Bernanke strongly hinted at a press conference last week that the end of QE was on the horizon, the markets went into a tailspin.

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."

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Why the Fed's QE Policy is Bullish for Oil Prices

Most investors have followed what the Fed's QE policy has done to gold, but few realize its impact on oil prices.

Recently, I talked about how crude was beginning to occupy a position as a store of market value ("Why Oil Is Becoming the New 'Gold Standard," May 20, 2013). The development has been a direct consequence of the flight from holding gold.

That flight may be tapering and a new floor established for the next major spike by the metal.

The problem is there is no agreement on which direction that move will be...

These days, a sudden improvement in gold prices may only extend as far as hedge funds and institutional investors covering shorts.

Nonetheless, there is an interesting parallel developing between the plight of gold and crude oil prices.

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