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Search Results for: fed gambles

Fed Gambles on Low Inflation and a Stable Housing Market

By , Managing Editor, Money Morning - • Print | Email

The so-called "exit strategy" has yet to enter the picture.

U.S. Federal Reserve policymakers yesterday (Wednesday) announced that the benchmark Federal Funds rate would remain in its record-low range of 0.00% to 0.25% for an "extended period." And policymakers also said that the nation's central bank would continue with its plan to wind down its purchases of agency debt and mortgage-backed securities.

The term "exit strategy" is a financial euphemism for boosting interest rates. By keeping short-term interest rates at what many experts say are artificially low levels, the Fed is betting that inflation will remain subdued in the short and medium-term and that the beleaguered U.S. housing market will be able to stage its recovery without crutches.

Weak Job Market and Low Inflation Stall Fed's "Exit Strategy"

By , Associate Editor, Money Morning - • Print | Email

Any speculation that U.S. Federal Reserve Chairman Ben Bernanke had his finger on the "exit strategy" trigger has been silenced.

Bernanke yesterday (Wednesday) faced the House Financial Services Committee to instill public confidence in the Fed's ability to exercise a smooth exit strategy and quell continued fears of a tightening monetary policy.

The Federal Open Market Committee (FOMC) "continues to anticipate that economic conditions — including low rates of resource utilization, subdued inflation trends, and stable inflation expectations — are likely to warrant exceptionally low levels of the Federal Funds rate for an extended period," he said.

Seven Signs of the Fed's Eventual "Exit Strategy"

By , Money Morning - • Print | Email

Looking for an exact date when U.S. Federal Reserve Chairman Ben S. Bernanke and his fellow central bank policymakers will raise interest rates?

Experts refer to this eventuality as Bernanke's "exit strategy" – a financial euphemism for the interest-rate increases that are certain to come … at some point.

That's just it – those experts can't tell you when that exit strategy will begin. I can't tell you that, either (Sorry, loaned my crystal ball to Miss Cleo for her new infomercial).

But what I can give you that the pundits can't is a "Road Map to Higher Interest Rates," which spells out the specific events that should precede the most-heavily anticipated U.S. central bank interest-rate increase in history. Follow it and you should be perfectly positioned to profit when the time comes.

(Remember, a few months ago, I introduced Senior Secured Floating Interest Rate Bonds, or SSFRs, an investment that you'll want to own when interest rates rise.)

So, without further ado…

How Banks Are "Crowding Out" the U.S. Rebound

By , Global Investing Specialist, Money Morning - • Print | Email

When U.S. President Barack Obama unveiled the $787 billion "stimulus" bill of extra spending and modest tax cuts last year, it became clear that the U.S. budget deficit was going to eclipse the 10% of gross domestic product (GDP) level for at least one year (and, as we now know, probably three years).

On those grounds, I opposed the "stimulus" – a position that was a lot less popular then than it has since become. However, as I'll show you below, it now looks as if I was right – and the implications for the U.S. economy are highly worrisome.

You see, the theory postulated by economist John Maynard Keynes holds that the extra spending stimulates additional output fails to address the question of where the money comes from.

Government cannot create wealth – it has to borrow it. If, before the stimulus, government finances were in good shape, as was the case in China, then stimulus does indeed stimulate: The modest budget deficit that it causes is easily financed, and the extra spending creates some jobs and maybe some useful infrastructure, depending on how well targeted it is.

In the United States, however, government finances were in a mess before the stimulus began.

How to Profit From China's Next Move

By , Chief Investment Strategist, Money Map Report - • Print | Email

For many investors who don't have the benefit of 20 years of experience in Asia like I do, figuring out what Beijing is up to is both puzzling and difficult.

But a handy little tool called a "Form 13F" can help.

In case you're not familiar with it, the 13F is a disclosure document that the U.S. Securities and Exchange Commission (SEC) requires institutional-investment managers to file when they hold $100 million or more of certain U.S.-listed stocks.

China's $300 billion sovereign wealth fund (SWF) – the China Investment Corp. (CIC) – just filed its first-ever 13F with the SEC, revealing that it purchased about $9.6 billion worth of U.S. stocks last year.

And it confirms much of what we've been telling you since the global financial crisis began – namely that China would take advantage of the crisis by purchasing beaten-down stocks, resources, and hard assets … and in a big way.

Even more important, this filing hints at what China is likely to do next – an insight that will help investors figure out where to put their money in order to maximize their personal profits.

Dow Jones

Dow Jones Today Remains Under Pressure After 328-Point Plunge

By , Executive Producer, Money Morning - • Print | Email

The Dow Jones today traded flat in premarket hours as investors continued to mull over the Trump administration's conflicting messages on trade policy.

Dow Jones

Why the Dow Jones Industrial Average Is Down Today

By , Executive Producer, Money Morning - • Print | Email

The Dow Jones Industrial Average fell over 370 point in premarket trading after President Donald Trump threatened to impose an addition $200 billion in tariffs on Chinese goods.

Dow Jones

What China's Latest Trade War Volley Means for the Dow Jones Today

By , Executive Producer, Money Morning - • Print | Email

The Dow Jones today is expected to open more than 200 points down after China slaps tariffs on U.S. oil exports worth $1 billion a month.

The ongoing escalation of trade tensions between the United States and China – the world's two largest economies – has rattled investor confidence.

Stocks

Congress Just Set the Stage for the Next Financial Crisis

By , Associate Editor, Money Morning - • Print | Email

Last month, Congress agreed to free thousands of banks from tight restrictions put in place by the 2010 Dodd-Frank law – legislation put in place to prevent a new financial crisis.

According to Money Morning Capital Wave Strategist Shah Gilani, we shouldn't be surprised.

"It's no surprise that Congress is pushing bank deregulation," Gilani said. "After all, it's a midterm election year, and both parties want bank and financial services money directed their way."

Market Crash

A Market Crash 2017 Could Happen If the Trump Agenda Fails

By , Money Morning - • Print | Email

The "Trump Rally" has sent the Dow soaring 14% since Election Day, but the market could fall just as quickly, and a market crash in 2017 is a serious possibility.

But with stocks soaring to new highs, a destabilizing event could pull the rug out from under the market.