Remember the Fed is your Friend. Those who follow it are often rewarded with handsome profits.
It is not as easy as it seems on the surface because the Federal Reserve Bank does not directly advise on gold, silver, stocks and bonds. To understand the Fed one must know the language, the “lingo” the “jargon” and the tone of what the Fed is saying and then be able to interpret it.
Many investors and analysts have misunderstood or misinterpreted the Federal Reserve. Once you have spent years, learning to speak Fed-ese like a native and you understand the culture and the restrictions and requirements of the Fed you might be able to trade the “Fed”. It’s like watching Fed Chairman Ben Bernanke playing puppet with investors when he speaks or gives testimony, he can make the markets dance to his tune.
The Federal Open Market Committee (FOMC) of the Federal Reserve just released its customary statement after its meeting on March 13, 2012. The following excerpt from the FOMC statement tells the story:
Strains in global financial markets have eased, though they continue to pose significant downside risks to the economic outlook. The recent increase in oil and gasoline prices will push up inflation temporarily, but the Committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate.
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions — including low rates of resource utilization and a subdued outlook for inflation over the medium run — are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.
The Fed gave some credence to the improvement in the economy and there is no sight of QE3.
If you do careful analysis of the current market and economic cycle we have been experiencing in the past few months an astute investor can find some clues about the future and take advantage of these..
- High volatility both on the tops and bottom
- Political upheaval around the globe.
- Strong U.S. dollar.
- Change in strength in real estate and utilities
- Change in the relative strength in precious metals.
- Ups and downs in financial crisis in Europe but no melt down.
- No recession in the U.S.
- Only a shallow recession in Europe.
- Slower growth in emerging markets.
The stock market is overbought, bond yields are breaking out, and gold and silver are oversold. Crude is too high as demand is continuing to fall with supply increasing.