QE4 On The DL- Fed Tries To Offset Fiscal Cliff Shenanigans

QE4 on the DL

- Fed tries to offset fiscal cliff shenanigans

Written by Keith Springer | 12.13.12

With little fanfare and hoopla, Ben Bernanke and his financial puppeteers at the Federal Reserve initiated QE4; because of course if all the other QE’s and Mini-me’s didn’t succeed, this one sure will, right? Hah!

On the plus side, the Feds tightened up the criteria from a target date “a few years in the future”, to specific requirements that need to be satisfied in order to stop the printing press. These conditions include: the unemployment rate dropping to 6.5%, inflation projections being no higher than 2.5% looking 1- 2 years ahead, and long-term inflation expectations remaining well-anchored. Interestingly enough, this will change little as the target unemployment rate mentioned is not forecasted to occur until at least 2015.

With the end of ‘Operation Twist’ (which consists of selling short-dated and buying longer-dated government debt to flatten or ‘twist’ the natural yield curve) the Fed will now buy an additional $40 billion dollars of bonds, making their purchase equal to at least $85 billion/month (split roughly equally between Treasuries and MBS). This will bring their balance sheet up to $4 trillion by next year, and with no end in sight!

Of course things would be a little better if we were investing this money into something that would improve our economy, like building infrastructure. Senator Joe Manchin of West Virginia may have said it best,“We’re spending billions in Iraq and Afghanistan. Let’s rebuild America first. If you build us a bridge or a school in West Virginia, we won’t blow it up and we won’t burn it down.” I must have been the only one listening.

Although the economy seems to be chugging along, we must remember that the Fed is not flooding the economy with all this free money because they think things are rosy, or even close to getting better. Stimulus programs are acts of desperation used to “hopefully” keep you from falling over a cliff (pun intended), and they work until they don’t anymore. This and more is discussed in depth in Facing Goliath – How To Triumph In The Dangerous Market Ahead, and investors must realize that this vicious spiral will continue until the root causes are corrected.

The bottom line is the Fed’s announcement yesterday about the expansion of a QE4 is a game changer. Inflationary risks have just been elevated. Apparently they feel like they do not need any checks and balances, and are free to flood the economy with ever increasing newly printed dollars. Of course all the existing programs have had little repercussions, as the bond market has allowed this deficit spending to run amok, for now. The worst part for me is the level of complacency we are witnessing from investors, and complacency is one of my top indicators for a market top. If next quarter’s corporate earnings disappoint again, run for the hills.

Investor Strategy

Once the fiscal cliff is solved, and yes it will be, I do expect a pretty good rally. Even so, the risks are high.  Of course you can’t sit in the bank earning next to nothing either. There are plenty of ways to make money in this market and in the dangerous market ahead, but the key is to do it without all the risk. Managing money, especially your own, is a daunting task, and that’s where we can help. Our “Invest for need, not for greed™” approach combined with our hands-on proprietary Top-Down Tactical™ investment management strategy can help you manage risk and deliver returns. If you would like to learn more and/or get a free second opinion on your portfolio, simply reply to this email, click our Appointment Request Form, or call for a no-cost no-obligation consultation today at (916) 925-8900.

 

 

 

 

 

 

 

 

 

 

 

 

Keith Springer

About Keith Springer

Keith Springer is FOX40's Financial Analyst , author of "Facing Goliath: How to Triumph in the Dangerous Market Ahead", radio host of "Smart Money with Keith Springer" on 1530 KFBK, editor of "Smart Money Newsletter", a financial planner, a market technician, a financial writer, multinational philanthropist, founder of Top Down Tactical™ and President and founder of Springer Financial Advisors in Sacramento CA, an SEC Registered Investment Advisory Firm. He has developed a proprietary process for successfully building tax-efficient and retirement portfolios and has been providing specialty wealth management services for over 27 years. He can be reached at 916-925-8900 or Keith@KeithSpringer.com.
This entry was posted in 2012, Smart Money Newsletter and tagged , , , , . Bookmark the permalink.

Comments are closed.

Springer Financial Advisors ("Advisor") is a federally registered investment adviser located in Sacramento, California. Advisor and its representatives are in compliance with the current filing requirements imposed upon registered investment advisers by the Securities and Exchange Commission and the State of California. Advisor's web site and its emails of general distribution are limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of Advisor's web site on the Internet or dissemination of informational emails should not be construed by any consumer and/or prospective client as Advisor's solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet. A copy of Advisor's current written disclosure statement discussing Advisor's business operations, services, and fees is available from Advisor upon written request.


You may also obtain publicly available information about Advisor through the SEC website as follows: http://www.adviserinfo.sec.gov/IAPD/Content/Search/iapd_OrgSearch.aspx. Advisor does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Advisor's web site or incorporated in an email, and takes no responsibility therefore. All such information is believed to be reliable and authoritative but does not constitute sufficient information to be the sole basis for sound investment decisions and all users thereof should be guided accordingly. Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended or undertaken by Advisor) made reference to directly or indirectly by Advisor in its web site, email, or indirectly via a link to an unaffiliated third party web site, will be profitable or equal the corresponding indicated performance level(s). Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client or prospective client's investment portfolio. Certain portions of Advisor's web site (i.e. articles, commentaries, etc.) may contain a discussion of, and/or provide access to, Advisor's (and those of other investment and non-investment professionals) positions and/or recommendations as of a specific prior date. Due to various factors, including changing market conditions, such discussion may no longer be reflective of current position(s) and/or recommendation(s). Moreover, no client or prospective client should assume that any such discussion serves as the receipt of, or a substitute for, personalized advice from Advisor, or from any other investment professional. The information is of a general nature and should not be applied indiscriminately to particular situations wherein it may not be completely applicable. Advisor is neither an attorney nor an accountant, and no portion of the content should be interpreted as legal, accounting or tax advice.

Springer Financial Advisors, Financial Planning Consultants, Sacramento, CA