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And the Easy Money Keeps on Rolling

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[Marriner S. Eccles Federal Reserve Board Building]

The Fed has spoken, and it’s more of the same from Chairman Ben Bernanke and his merry band of central bankers. The statement from today’s Federal Open Market Committee meeting was essentially the same as last month’s statement, with the Fed maintaining its current $85-billion-per-month bond buying program. No “taper” this time. Just the same, we didn’t get the much-anticipated taper in the September FOMC meeting.

Here’s the money quote from today’s Fed statement on just that subject:

“The Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases.”

The translation here is that the money spigot is going to be open for a lot longer. According to most market watchers, including me, do not expect to see any kind of tapering until the spring of 2014.

What does this situation mean for the markets? Well, it means stocks are likely going to continue to be bought without regard to fundamentals. In other words, it’s all about quantitative easing, not the micro factors such as corporate earnings or even the macro factors such as economic growth — or the lack thereof.


Although there is a debate about just when the Fed will finally begin to pull back the reins on the easy money, the fact is that it’s more of the same from the central bank. As such, the market is likely to react the way it has for most of the year.

The one caveat that I think is important to note is what the Fed said about inflation. Today’s statement including the following line: “The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance…”

The translation here is that despite the massive amount of money the Fed has pumped into the system over the past several years, the central bank still has not been able to achieve its economic growth targets.

That situation, my friends, should be enough to make us all worried. It also is a reason to make sure you have the tools in place to protect your money and to allow you to weather any market downturn.

To find out more about how this is done, check out my Successful Investing advisory service today. It just might help you avoid the next Fed-created bust.

On Inefficiency

“The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.”

–Bill Gates

The Microsoft founder knows a little something about technology and efficiency. So, given all of the problems with the Healthcare.gov website, I thought it might be good to remind everyone that when it comes to government, inefficiency is always magnified.

Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow Making Money Alert readers, send it to me, along with any comments, questions and suggestions you have about my audio podcast, newsletters, seminars or anything else. Email Doug.

Read my e-letter from last week, The Yellen Destiny. I also invite you to comment about my column in the space provided below.

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About Doug Fabian

Doug Fabian is the editor of the monthly investment newsletter Successful ETF Investing, and is the host of the syndicated radio show "Doug Fabian's Wealth Strategies." He also recently began writing the weekly trading service ETF Trader’s Edge. Taking over the reins from his dad, Dick Fabian, back in 1992, Doug has continued to uphold the reputation of the newsletter as the #1 risk-adjusted market timer as ranked by Hulbert’s Investment Digest. Doug published the book "Maverick Investing," and has appeared as a commentator on CNBC, Fox News, and CNN. He also has been quoted in the Wall Street Journal, USA Today, Barron's, and other publications. For more information about Doug’s services, go to http://www.fabian.com/

View all posts by Doug Fabian →


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