Don’t Fight The Fed

We’ve seen the US Federal Reserve manipulating the stock market over the past few weeks.  Actions like this have never been seen before in history.  Think back to the Great Depression.  What we’re seeing today is more aggressive than even the steps taken during our darkest hour.

The Federal Reserve is playing a game of chicken with the financial market.  They’re risking the US Dollar and our economy.  It’s all risked on a bet that they can manipulate the world’s largest economy, and make it bend to their will.

What the Fed is trying to do is just like trying to land a fighter jet on an aircraft carrier… in the middle of the ocean… blindfolded.

Why should you care?

Because knowing what the Fed is doing means the difference between losing thousands of dollars… and grabbing big profits in your retirement and trading accounts.  It’s that simple.

Now, I’ll tell you everything you need to know to profit from these “Big government” moves.  But first a little background…

The growth hormones the Fed is using is green… it’s money.  They’ve thrown open the gates of the financial treasury and dropping cash on the economy like there is no tomorrow.

You can see it in the latest news.  Just a few weeks ago they announced a new round of “stimulus.”  $600 Billion would be thrown into the markets to manipulate prices and interest rates.

The belief is low rates will encourage economic growth… but that’s not the case.  The US Dollar is being destroyed (more on that another time).

And, despite low rates, the bankers have closed up shop and gone home.  No one is loaning money. The easy money is no longer available.

You need to look no further than your local mortgage broker for proof.  It used to be most people interested in buying a home could qualify for a loan…. Now it’s just the opposite.

Most people DON’T Qualify.

It’s the same for small business loans, and personal credit.  Even credit cards, a huge source of easy money, has tied up the purse strings.

So lending’s not taking place.  Economic growth is slower than molasses in winter, and the Fed is still injecting the economy with money.

The result is INFLATION.

Small amounts of inflation are fine… and the Fed will point towards recent CPI data to show it’s under control.  But the bigger problem isn’t inflation… it’s runaway inflation.  Once it starts, it’s very difficult to stop.

Just look at Germany in the 1920’s or even Zimbabwe today.  Just a few years ago, economists were reporting Zimbabwe’s inflation rate at over 50% per month.

Hyperinflation destroys economies… and it could destroy ours!

The biggest problem is the arrogant Federal Reserve.  They think it’s easy to control inflation – with financial leverage.

I say Hogwash.

Once we see inflation hit, it will start slowly.  The Fed won’t react in time.  Inflation will then pick up steam and by the time the financial numbers show the ugly truth, it will be too late.

The cost of everything from bread to milk, meat, and gasoline will jump in value.

But your pay… your wages won’t rise as quickly.  You’ll be caught in the middle of a sticky paycheck, and rising prices.

Chart courtesy of StockCharts.com


The result is economic devastation.

The worst investments you can own during an inflationary time are bonds.

Their returns are fixed, and inflation eats away at your earnings.  Even high yield bonds will trouble.  What’s the use of earning 8% to 10% per year on your money when inflation is eating away at it by 5% per month!

Inflation protection is all about hard assets.

Think about Gold.  Gold is a universal carrier of wealth.  A gold coin can be exchanged for goods here in the US, in China, Russia, even Europe.

As inflation hits, it pushes up the value of everything and gold is no exception.

Just look at a recent gold chart.  As central banks around the world injected easy money into the economy, the price of gold started climbing.

Gold’s not the only protection from inflation.  Other hard assets… Like oil & gas pipelines, real estate, even commodities will see values climb with inflation.

Remember this, hard asset investments are the only way to keep your head above water during inflationary times.