- ECB and Fed printing presses race to the finish
News that European Central Bank President Mario Draghi has agreed to an unlimited bond purchase program to buy troubled nation’s bonds is evidence that world banks will do whatever it wants to, whether it follows the rules or not. Of course, it’s not illegal when governments break the rules (wink wink).
The fact is that the ECB has no authority to print money or buy bonds, but they are doing it. A similar situation is going on this side of the pond as well, as Ben Bernanke and the Federal Reserve print dollars at will for their stimulus programs, seemingly with little consequence.
What will eventually put a stop to it will be the Bond Vigilantes who will push up yields to justify the risk of being paid back. I never would have guessed that so much money could have been printed out of thin air with so little concern. It makes no sense and it makes it difficult to invest and take a lot of risk in a market where there are no rules. Therefore, investors must be invested somewhere other than cash, like CD’s and money markets, to get any return that has a chance of beating purchasing power (inflation and taxes).
The market will likely drift higher for the next few months as the election gets behind us and with all enormous liquidity in the markets. Of course even trees don’t grow to the sky and a bear market should hit us in 2013. By next year, all elections will be over and leaders should start to do what’s right and Obama will not have to worry about reelection, so they will worry about their legacy and bring their fiscal houses in order. That will coincide well with the presidential cycle and that the bull market is already 43 months old, and they typically only last 39 months.
Average investors should not take the risk of trying to time the market and therefore should buy high yielding investments yielding more than the S&P such as MLP’s, Preferreds, and corporates. That is where we can help. Managing money, especially your own, is a daunting task, and thats 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.