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    rising rates

    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

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Quantitative Easing

Fed Policy Failures Leave $10.8 Trillion Under the Mattress

fed policy

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…

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

Janet_Yellen_Headshot

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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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...

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

KFG mug tight

Money Morning’s Chief Investment Strategist went on record with his prediction months ago, stating that there’s not a central banker in the world who has the guts to step away from QE. Few – if any – investors agreed. But they didn’t lock in a 100% gain, either…

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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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What You Need to Know About Silver Prices and the Fed QE Taper

Silver ingot

Silver prices have rebounded about 28% since the lows of late June, and are currently trading at around $23 an ounce.

This move was key for silver prices - it means the metal broke out above its 50-day moving average.

Barclays' technical analysts pointed out that last week was silver's best week since 2011, with a gain of 14.3%.

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Why the U.S. Dollar is Rising – And Why It's Still Doomed

Currency Dollar Shot Q

Many have wondered - and rightly so - why the U.S. dollar is rising even though the U.S. Federal Reserve has done just about everything possible to debase the currency over the past five years.

Over the past two years, the U.S. Dollar index, which measures the dollar against a basket of major world currencies, is up by more than 12.6%.

Part of the answer is that most of the world's other central banks have pursued easy money policies similar to the Fed's. In the so-called "currency wars," the U.S. dollar has one major built-in advantage.

"The U.S. has never defaulted," explained Money Morning Chief Investment Strategist Keith Fitz-Gerald. "The world may hate our guts, but when all hell breaks loose, they all love our dollar."

Also helping to explain why the U.S. dollar is rising is that it remains the world's reserve currency - the money a majority of nations use to buy commodities such as oil -- and that the U.S. economy, for all its warts, is in better shape than most of the other developed economies in the world.

"The dollar the best-looking horse in the glue factory," Fitz-Gerald said.

So it wasn't too surprising that when the Fed recently hinted that it might start "tapering" its quantitative easing (bond-buying) policies later this year, the U.S. Dollar index spiked 3.1%.

But Fitz-Gerald said that investors still need to be wary of the stronger U.S. dollar going forward.

This Sept. 2 Event Could Send the U.S. Dollar Crashing

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The Fed Or the Fundamentals? What's Behind Stock Market Moves?

Bull toy Q

What's driving the stock market - the Fed or company fundamentals?

The answer, of course, depends whom you ask.

Has most or all of the growth in the market over the past few years been due to the Fed's massive QE easy money stimulus?

Or is it fundamentals like earnings per share and the price/earnings ratio?

We asked three experts to weigh in: Money Morning Chief Investment Strategist Keith Fitz-Gerald, Money Morning Capital Wave Strategist Shah Gilani and Brian Wesbury, the chief economist at First Trust Advisors.

Here's their take.

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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?..

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The New Crisis Warning Just Issued to the Federal Reserve

Bubble

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.
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."

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