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New Word for Fed’s Delaying

Submitted by Brenda Wenning on Thursday, January 15, 2015 - 9:00am

There’s a new word in the Federal Reserve lexicon to describe how long the Fed will take to start raising interest rates – “patient.” What’s the difference between this and its predecessor phrase describing the Fed’s willingness to wait? Hard to say. This one sounds like yet another rhetorical device to obscure its intentions and buy it flexibility.

Those Toxic Low Rates

Submitted by Brenda Wenning on Friday, January 9, 2015 - 9:00am

Low interest rates, often touted as our economic salvation in the wake of the Great Recession, are actually toxic. They delude investors into taking on too much risk, in a vain bid to get a better return.

The Fed’s Big Unwinding

Submitted by Ray Ferrara on Monday, December 29, 2014 - 9:00am

The Federal Reserve faces a dilemma: What to do with all the debt securities it amassed during its stimulus program, known as quantitative easing, or QE. Does the central bank sell off its holdings or hold them until they mature?

The Forecast: All Wrong

Submitted by Lon Jefferies on Tuesday, December 23, 2014 - 9:00am

The media love forecasters, yet seldom holds them accountable for how the prediction turns out. At the beginning of 2014, we heard some widely accepted expectations of the investment environment. Let’s review those predictions. Spoiler alert: They’re all wrong.

Time to Dump Bonds? No

Submitted by Lon Jefferies on Tuesday, November 11, 2014 - 12:00pm

If you invest in bonds, you probably worried in recent years about rising interest rates. You shouldn’t.

Climbing rates mean your existing bonds effectively yield less and make you yearn for newer bonds with higher yields. Bond prices fall as yields rise. A valid concern – today’s historically low interest rates are overdue to jump – but is now when to scrap your old paper?

First, consider one of the most basic principles of investing: Markets are unpredictable. Are we certain interest rates will rise? If so, soon?

The Fed’s Foggy Phrasing

Submitted by Brenda P. Wenning on Friday, November 7, 2014 - 9:00am

The mystery of how long the Federal Reserve will keep short-term interest rates near zero continues. But now, oddly, the central bank is looking at different ways to say they will stay low for a “considerable time.” Why do we need a synonym for this maddeningly vague phrase, which Fed chief Janet Yellen reiterated in her recent press conference?

Rate Forecasts: Always Wrong

Submitted by Michael Garry on Friday, October 31, 2014 - 9:00am

Don’t believe interest rate forecasts, let alone build your investment strategy around them. Expectations about interest rates change because of the news every day. But they regularly are dead wrong.

In a recent article, Bloomberg News noted that the rally in the U.S. Treasury market in 2014 was stronger than every economist it surveyed had predicted. Yes, stronger than every one of 66 economists polled.