*** IMPORTANT: As you know, every 60-days or each two-month cycle, I publish the portfolio activity in my own Legacy Account, designed to achieve long-term compounding, a wealth strategy, which encompasses targeting double-digit returns, combined with lower risk, compared with the S&P 500. The August-September edition will be published this Tuesday at 09:30 AM CST. ***
Our team has spent several hours dissecting the notes from the latest FED interest-rate announcement, but the most important nugget was buried in an interview that FED Chairman, Jerome Powell, gave after the meeting concluded.
Portfolio Wealth Global has studied the writings of Jerome Powell all the way back to his previous roles at the central bank, but also going back to his days as a partner at The Carlyle Group, a private-equity investment firm, which made a fortune, thanks to the war in Iraq, and has strong ties with the Bush family, among other powerbrokers.
FED Chairman Powell, compared with other central bankers, is wealthy. Our research puts his net worth at over $120M, which makes him a different animal than Ben Bernanke and Janet Yellen, in terms of his career in the business world.
The most significant change this brings to the table is his belief in free markets, which Greenspan, Bernanke, and Yellen were not fans of.
In other words, as the next market dip happens, we don’t see the central bank attempting to intervene or looking to reassure investors, necessarily. The board of governors will let the chips fall where they may this time around. Now that inflation has met their target at over 2% and with unemployment rates at the lowest levels they’ve been in decades, the FED will look to disengage as much as possible, while they’re ahead.
As of now, they look like heroes to the investment community, saving the U.S. economy from its near-death experience in 2008 and delivering a long-awaited recovery for the general economy.
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President Trump doesn’t like these rate hikes because it makes his job harder. For one, the Federal Government is forced to pay higher interest payments. Secondly, it makes foreign currencies weaker compared with USD, which is detrimental to U.S.-based exporters. Thirdly, it is bringing us closer to the end of the stock market boom, which President Trump is, politically, taking credit for.
It looks to us like the Federal Reserve knows that there is no way to tighten monetary conditions by raising interest rates and letting its bonds portfolio shrink without causing friction. It wants Trump to take the heat for any downfall because the FED’s reputation with investors is flawless right now – it doesn’t want to tarnish it, as they finally found their sacrificial lamb.
This means many things, but the chief of them is that investors now know their sugar daddy, their downside protection team, which always sits ready to prop up the markets at every dip it takes, the Federal Reserve liquidity bailout, is no longer behind them.
Put differently, the central bank has just signaled to the investment world that it better be cautious and risk-averse because the good days are over. We’re on our own.
You and I know perfectly well what this means. With mom and pop investors feeling the “Wealth Effect” and more bullish than ever, the euphoria is about to begin at the worst possible time for them.
The best thing you can do right now is to raise your cash levels by either saving more or by liquidating your biggest winners.
Big cash positions will come in use very soon.
Research Partner, PortfolioWealthGlobal.com
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Governments Have Amassed ungodly Debt Piles and Have Promised Retirees Unreasonable Amounts of Entitlements, Not In Line with Income Tax Collections. The House of Cards Is Set To Be Worse than 2008! Rising Interest Rates Can Topple The Fiat Monetary Structure, Leaving Investors with Less Than Half of Their Equity Intact!
This work is based on SEC filings, current events, interviews, corporate press releases and what we’ve learned as financial journalists. It may contain errors and you shouldn’t make any investment decision based solely on what you read here. It’s your money and your responsibility. The information herein is not intended to be personal legal or investment advice and may not be appropriate or applicable for all readers. If personal advice is needed, the services of a qualified legal, investment or tax professional should be sought.