Control The Wind… Or Adjust The Sails
Written by Keith Springer 8.1.13
While we are managing our own personal finances by spending, saving, and hopefully investing, the Fed is managing the entire American economy. Their actions have kept us out of another recession or worse, at least so far.
Naturally an economy needs spenders to grow. The Fed wants you to spend more, especially by taking on loans and “please please please” to buy a new home. Most Americans have other plans, like trying to get our debts under control and save for retirement, which is coming like a bat out of hell or already here.
The Fed has been in the news a lot. My job is to help you make sense of all the noise out there. Federal Reserve Chairman Ben Bernanke recently announced that the Fed may begin to taper its quantitative easing program by the end of the year. In plain English, this means that the Fed might slow its easy money program that has kept interest rates at very low levels.
This sent investors scrambling, causing a sell-off in the stock market. If interest rates go up, then it costs more to borrow, thus slowing an already sluggish economy. After watching the markets react badly to the tapering talk, the Fed quickly responded by holding a press conference to assure investors and clarify its position that such action will only take place if the right economic conditions are met. Just this week they said they are going to hold off any taper because the economy just couldn’t handle it.
Although things are definitely better than a few years ago, a recent survey indicated that over 75% of Americans are living paycheck to paycheck. Unemployment hasn’t been under 7% since November of 2008 and is currently at 7.6%. The Fed can do what it wants to, and that’s what scares the markets.
We may once again be entering new territory. Just as nobody knew what was going to happen with unprecedented amounts of monetary intervention by governments and central banks, nobody knows what will happen when these programs stop.
The immediate fallout from Bernanke’s announcement indicates that we may be seeing increased uncertainty and volatility in the markets. The rise of the markets from their 2009 bottoms have been based on investors knowing the Fed would print money and provide easy credit. With a Fed pullout looming, investors know that assets and borrowing costs will have to adjust. This adjustment period means volatility will be back with a vengeance.
We knew this day was coming and have been talking about it for some time. We have formed a plan around these economic eventualities to help you achieve your goals of building wealth and economic security. We cannot change what the central bank does, but we can choose how we react to its policies; much like my philosophy that we can’t control the wind but we can adjust the sails.
The key is to be properly invested in a portfolio that is designed to get the best returns with the least risk possible, as the Springer investment approach is designed to do by managing risk and delivering returns in any market.
…… and that’s where we can help. To learn more about our powerful proprietary Investment Management Strategy and/or get a free second opinion on your portfolio, simply reply to this email, or give me a call for a no-cost no-obligation consultation today at (916) 925-8900.