Tag Archives: US Federal Reserve

Investors Seek the Fed’s Guidance on the Economy

What do the latest Fed minutes tell us? Since the recession began, the Fed has set two goals for the economy. Perhaps the foremost objective is to maintain inflation at or near the 2% level. The one crisis point would be a drop in inflation below the flat line. This would indicate that the economy is teetering on the brink of recession. The entire quantitative easing program is aimed at keeping the economy growing. We are seeing the effects of stagnation in Europe with the introduction of negative interest rates to stimulate the economy. So far, the US economy has been expanding, albeit very slowly. The latest 2nd quarter GDP numbers came in better than expected at 4.6%. The media has jumped on this number and is prodding the Fed to raise interest rates. However, all is not that great. The 1st quarter GDP actually fell 2.1% after a brutally cold winter in the Northeast. When taken together these numbers indicate a moderate expansion in the economy. According the Fed’s statistics, inflation in August was at 1.7%. However, this number does not include food, energy and shelter.Continue Reading

The Fed Plans to End of Asset Purchases by October

For investors, following the US Federal Reserve’s policy changes gives us a heads up on possible market movements. Since 2009, the Fed has embarked on an unprecedented policy of quantitative easing with the latest round of buying $85 billion per month of treasuries and mortgage backed securities. The net effect of these policies has been to swell the Fed’s balance sheet to a massive $4.2 trillion. Now the Fed is in the process of unwinding some of this activity. In December 2013 the Fed started “tapering” or reducing these asset purchases. To get a sense of what the Fed is up to we look at the minutes of their recent meetings. These are made public for the previous month. The latest issue was for June 17-18.Continue Reading

Fed Tools: The US Federal Reserve’s Toolbox

This past week Janet Yellen, Chairwoman of the US Federal Reserve, gave her report on the state of the economy. The theme was “steady as she goes” with only minor adjustments to monetary policy. Here are some highlights from her text:Continue Reading

Where is the Price of Gold Headed?

The markets have turned in a strange performance over the past several weeks. The numbers on the economy came in weaker than expected with GDP down -.1% in April. Unlike other recoveries, spending growth has decelerated. Each year it takes a step down. This is not the way it should be. In all past recoveries, spending growth increased as the economy grew. Discretionary spending was up but 90% of that was due to inflation, especially in food and energy. Consumers are being forced to spend more. Our US deficit is running at about $17.3 trillion. The US Federal Reserve’s Balance Sheet has grown to $4.9 trillion. Surprisingly, the US stock market made a new all time high in the Dow and S & P. Gold, on the other hand, fell to its lowest level in the past 15 weeks.Continue Reading

How to Protect Your Portfolio

With the stock market averages making new highs every few weeks, investors are becoming increasingly edgy about what will happen next. These are unsettling times. We have a high US national debt running about $17 trillion. Added to this the US Federal Reserve has bought $4 trillion of bonds and mortgage backed securities from the big banks. They are now in the process of reducing their purchases, but they still must sell these securities back to balance their books. In addition they must continually issue new bonds to finance our debt.Continue Reading

Market Update May 15, 2014

So far 2014 has proved to be quite frustrating and confusing. We ended 2013 on and upbeat note with the Dow and S & P making new all time highs. At the time only 16% of investors were bearish on the market. In December 2013, then Chairman, Ben Bernanke, of the US Federal Reserve started to taper bond purchases by $10 billion per month.Continue Reading

The Fed’s New Policy Changes. What are they Telling Investors?

Could the Fed’s new policy changes signal the end of the bull market? There is a often quoted saying: “Don’t fight the Fed.” If that is the case, perhaps it’s time to step back and analyze exacting what took place this week. The Fed uses two ways to communicate with the public. It holds eight meetings each year. The Chairperson, in this case Janet Yellen, issues a consensus statement on overall Fed policy and issues some guidance going forward. The second and equally powerful communication comes from the minutes of the Federal Open Market Committee (FOMC) whose job it is to oversea the Fed’s market operations and steer interest rates in line with committee consensus.Continue Reading

US Federal Reserve Monetary Policy 2013-2014

Monetary policy is an important driver of economic growth. It sets in motion and controls, by and large, the supply of money available for lending and commerce. As 2013 comes to a close, the Dow Jones Averages, the S & P and the Nasdaq are setting new highs. On December 20, 2013 the Dow closed at 16,221.14, the S & P at 1818.32 and the Nasdaq at 4,104.74. Much of this spectacular gain was the result of US Federal Reserve Monetary Policy.Continue Reading

Janet Yellen’s Testimony and What it Means for Investors

The Stock Market crash threw the United States and the world into a state of chaos. Within a few months 7 TRILLION of American’s wealth vanished into a black hole. 16.4 TRILLION was lopped off real estate values. To plug the dike Ben Bernanke, Chairman of the US Federal Reserve, embarked on a never before tried program of Quantitative Easing whereby the Fed bought bonds and mortgage backed securities from banks and mortgage companies. The big banks received this money as credits on their balance sheets.Continue Reading

Investing for Q4 2013

In 2009, Ben Bernanke, Chairman of the US Federal Reserve embarked on an unprecedented program that to date has provide $3 trillion in stimulus to the US economy. The Fed did this by buying treasury securities and mortgage backed securities. The money was credited to bank balance sheets, providing them with boat- loads of cash to use, supposedly for lending to stimulate growth. However, this did not happen. The banks kept most of the money and speculated in the markets driving the Dow Jones Industrial Average to new all time highs. If the banks had been forced to lend the money we would have a much different economy.Continue Reading