Fed keeps the party going
The Federal Reserve, spooked by the looming budget fight and modest job gains, holds off on tapering its money pumping stimulus.
That decision has set off another rip-roaring, liquidity-fueled melt-up in the stock market -- as investors climb over themselves to buy up positions in Fed-sensitive, interest-rate dependent assets. Gold and silver. Treasury bonds. Mortgage REITs. Homebuilder stocks. Steelmakers. Emerging market stocks. Stuff like that.
Of course, things remain stacked against regular investors (there is evidence that someone got wind of the decision a few minutes early, given moves in precious metals and in the bond market). And, as I mentioned in a recent video segment and column, this isn't going to end well (the Fed seems set on waiting until inflation is out of control before pulling back). But for now, the market is off to the races.
The overall takeaway is that the economic data -- especially housing and jobs -- stalled enough that the Fed backed away from the taper of its $85 billion-a-month bond purchase program (which started last September) that seemed so likely back in May and June. Chairman Ben Bernanke, in the post-announcement press conference, also mentioned concerns over the upcoming budget/debt ceiling negotiations in Washington.
But, as I mentioned in the video segment, the Bernanke Fed has erred on the side of more stimulus, rather than less. And thus, it's not surprising that they did what they did today.
It's like this: Given the deep structural problems in the job market, with the labor force participation rate back to late-1970s levels, the Fed isn't going to pull back in any meaningful way until inflation forces their hand. (I wrote about this in another recent column.)
This is especially true with dovish Fed vice chair Janet Yellen now seen as the front runner to replace Bernanke when his term ends in January. The former head of the San Francisco Fed has been a relentless supporter of aggressive stimulus and seems to believe, at her core, that cheaper money can solve our problems.
For now, at least until the budget fight heats up in October, investors really have no choice but to chase the uptrend here. The focus should be on new areas of strength, such as the iShares Mortgage REIT (REM), which I've added to the Edge Letter Sample Portfolio.
Disclosure: Anthony has recommended MTL, KBH, DHI, and REM to his clients.
Check out Anthony's new investment newsletter, the Edge, and his money management service, Mirhaydari Capital Management. A two-week free trial has been extended to MSN Money readers. Click the link above to sign up. Mirhaydari can be contacted at firstname.lastname@example.org and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.
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No matter what’s your party affiliation if you have been in the market for the past four years you have made a lot of money. Today the bears got ripped and are mad as hell.
Market is nothing but a scam with the lower income footing the bill. What a joke.
buying up bonds to 'artificially' bump up the markets benefits whom exactly? outside of course the obama regime insider trader cronies...but John Q. Public is outta work, actually 90MILLION John and Jane Q. Public's are now outta work!!! so they're not investing in anything except trying to stay alive and above water financially, they ARE NOT MOVING THE ECONOMY AT ALL!!
so if the markets are not moving 'naturally' as they should be if there actually was a TRUE ECONOMIC BOOM or remote RECOVERY....and of course you can' keep 'printing' your way outta debt, the debt is 18trillion and going up, so what exactly is the bottom line here?? and then what the phuck????
COP at $70.56 a share! TOG and Sangria called it!
Goin to Vegas Baby!
Yes we worked at it and a couple bucks are made....Not a bad oil co.
Now we can move on and make some more...
Vegas sounds great, but a long road trip so I will stay within 400 miles and play a 1000, 21 tables.
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