celebrex with aspirin

Fed Ques QE3!


Federal Reserve Initiates QE3 With $40 Billion Monthly MBS Purchases

Drum Roll QE3!!! The Fed Reserve announced yesterday it will buy 40 Billion$USD per month in the MBS (mortgage backed securities) market and extend Operation Twist until the unemployment rate improves “‘substantially”. This action will increase the liquidity of the secondary mortgage market as well lower home loan rates. Of the Fed’s dual mandate,  a lower unemployment rate and a targeted inflationary rate, it appears that job market stability has been given priority over inflation expectations. So, one would be wise to hedge against an imminent inflationary wave due to further open ended $USD debasement. In my humble opinion real estate and hard commodities is that hedge. If you can buy and hold real estate (non-speculative financing or cash), then your investment will keep pace with inflation in nominal terms. Ultimately, however in real terms when markets correct for yield manipulation relative to inflation housing will become more illiquid and that is why we suggest the buy and hold strategy specifically. To be in ARM financing, is to be a the whim of central bankers monetary policy and given our forecast of rate volatility upon cessation of monetization practices we advice against speculative financing unless you are a experienced investor with adequate reserves and a firm market perspective.

We also forecast a rally in equities, however, believe most retail traders are ill equipped to keep pace with the volatility and the HFT (high frequency trades) environment. Further, paper trades can be easily frozen, positions stopped out, experience margin call revisions and various other manipulations which sku traditional risk factors. Given that markets and clearing houses have already successfully demonstrated their willingness to do so, we think there is a high likelihood that this will occur again given any significant price volatility.  If you must take an equities position, consider the sectors most apt to benefit from such stimulus. Mining stocks and consumer staples for example.

By the time inflation adjustments from these monetary policies have been priced into the bond market it will be too late to take a real property position that wouldn’t come attached to a low LTV (loan to value) and/or high APR%. To be in cash savings will only degrade your purchasing power and you will be forced to take a $USD denominated asset position of any class. Considering it is the intent of the monetary authority for you to do so, it may be beneficial to buy real estate when prices are historically distressed, albeit stabilizing, and home loan interest rates are low. If you are interested in purchasing real property or would like further information about how you can protect your families wealth from $USD debasement, then please contact our team today. We would be happy to review your goals, provide forecasts and projections, which ultimately will vanguard your families wealth. Whether you are a first time home buyer or experienced flipper we can help.

There are no comments yet.

Leave a Reply