A Few Notes On Invest With The Fed

Ted

FYI: In the introduction to their 2015 book entitled Invest with the Fed: Maximizing Portfolio Performance by Following Federal Reserve Policy, authors Robert Johnson, Gerald Jensen and Luis Garcia-Feijoo state: “Our purpose in writing this book is to provide a general overview of the Fed’s role in the financial markets, but, more important, to offer investors a road map that can be used in designing an investment portfolio that takes account of Fed policy.
Regards,
Ted
http://www.cxoadvisory.com/27128/economic-indicators/a-few-notes-on-invest-with-the-fed/#more-27128

If you are interested in this book, you can purchase it at Amazon.Com by going to MFO Home Page and clicking on the Amazon icon. This helps David and MFO keep going !

davfor

@Ted Thanks for this link.

The bullet quotes at the link provide a lot of food for thought...here is one interesting sample:

"The good news is that…emerging markets and the Scandinavian countries perform admirably when monetary conditions are either indeterminate or restrictive."

I'll need to think about that for a while!

Mark

Interesting maybe, but not new. Don't fight the Fed and stick with the trend.

davfor

@Mark "Don't fight the Fed and stick with the trend" makes sense to me. I am wondering if "Don't fight the Fed" helps you to make sense of the "admirable" emerging market performance that was observed when the Fed was actively increasing both the discount rate and the federal funds rate. (Or, perhaps the high growth rates present in emerging countries simply overwhelms the adverse global impacts that result from Fed tightening.) Any thoughts?

scott

" Don't fight the Fed and stick with the trend."

Don't Hussman, in other words.

Old_Joe

Try and be nice, Scott.

davfor

@Scott "Don't Hussman, in other words." I wondered if that was what Mark was getting at.....I am still picking up on the slang used in this neighborhood. Ted's post provided me with several things to consider from a somewhat different perspective....

Mark

davfor - Don't fight the Fed is an old, but reliable adage.
http://mutualfunds.about.com/od/wheretoinvest/fl/What-is-the-Meaning-of-Dont-Fight-the-Fed.htm

And like the US Fed, other countries are lowering their rates as well, some below zero, in an effort to stimulate their economies. Ludicrous, in the long run sure, but not for investors who understand how and why it works. At least it will work until it doesn't anymore which is also why we follow the trend. Trying to guess what will happen next is as much a waste of time as predicting whether and when the market will rise or crash.

I used to read all the articles and listen to all the pundits in an attempt to outthink the market. But the market doesn't care what I, or anyone else thinks. It's a lot easier to just follow the money. The pessimistic arguments are easy to see and understand. The trouble is that has been the case for a very, very long time and has proved to be not only wrong but quite costly.

TSP_Transfer

@davfor said
..I am still picking up on the slang used in this neighborhood.
Try typing in "ted woodshed"in the search box @ top right of this page for an insight on the sling , oops I meant slang,used here.

davfor

Mark
May 21 edited May 21 Flag
davfor - Don't fight the Fed is an old, but reliable adage.
http://mutualfunds.about.com/od/wheretoinvest/fl/What-is-the-Meaning-of-Dont-Fight-the-Fed.htm

The article you linked and your comments both make sense to me. My personal portfolio bears scars from wounds that were self-inflicted before I accepted the shortness of the time horizon that is relevant the stock market. So, I appreciate what you are saying. However, articles like the one Ted posted still have the potential to offer useful insights to some investors. I am not an "active" trader. My core portfolio (90% of the total) is adjusted only once a year. My current allocation to stocks is neutral for me at just over 50%. I pay active managers of mutual funds that include FPACX, BERIX, SGOVX, and COBYX (yes, I know that one raises eyebrows!) to move move $'s from cash to stocks and back again as they see fit to fine tune that ratio -- unless a serious bear market crash event warrants my active shift of additional dollars from a "near cash" set-aside into stocks. My current goal for my next annual portfolio adjustment will be to reduce the number of my holdings without impacting the allocation mix. To me, the bull market in stocks appears to be closer to its end than its beginning. So, insights that can be gleaned from articles such as Ted's post that might help me decide which investments to cull from the herd at this stage of the market cycle are welcome!