The Mike Bertelsen Project

No surprises from the Federal Reserve Open Market Committee.The committee said it would take $10 billion off its monthly asset purchases. Interest rates to remain at 0 - .25%.

In the June minutes, the committee said it would conclude QE in its October meeting.

In the statement today, the FOMC said, "a range of labor market indicators suggests that there remains significant underutilization of labor resources." Translated: no significant job growth. Expect inflation to rise just a bit too.

For the full statement from the Fed, click here for the businessinsider.com story which was the source for this entry.

CNBC welcomed Jim Grant of Grant's Interest Rate Observer. Jim is bullish on the asset class global market. He went on to say that the Fed has crushed credit spreads. This has resulted in many investors shorting treasuries to hedge against rising rates.

Has the Fed fueled inflation?

ADP released the June numbers for payrolls. Manufacturing up 12,000, construction up 36,000. May payrolls left unrevised at 179,000 to the upside.

Shale drilling is allowing the United States to become more of an oil producer than ever before. It is changing the global oil producing landscape. This will help growth by diminishing the rise in oil prices. When inflation rises (which it will) energy will most likely be at a lower price. Household incomes will be helped.

Central banks have used energy prices to figure core inflation.

The U.S. trade balance would be equalized. The U.S. would have less of an oil constraint.

Source story from businessinsider.com

                                                  Ben Bernanke, Federal Reserve Chairman

High frequency. That's how I describe the market economy these days. We have to be on a whole new high frequency to keep up with what's going on. Or at least I'd like to think so. We have had quite a bit of information to digest. With Quantative Easing in place with the Fed buying mortgage backed securities at a furious pace, which will keep interest rates low; perhaps as far out as 2016, giving investors more incentive for dividend paying stocks. ETF's are also a big product now (no more stock picking).

What will Treasuries be like in one year? Flatlined? Well, maybe. The demand for them surely can't be increasing. Someone must know something I don't. Well.... yeah.

The S&P 500 has had a good three-year run. Throughout it all.... fiscal cliff, etc., the S&P has been a leader as far as market barometers go.

The economy still has a demand problem.

Labor share of income hit an all-time low in 2012. Corporate investors reaped nice gains as the labor market stays weak. The Retail ETF (XRT) beat the S&P 500, while the Homebuilders ETF (XHB) was the cream of the crop.

And all of a sudden housing is back. Thank you Ben! The Fed move is tying more to housing than what I had expected. With that...........


expect housing to continue the recovery.... watch home affordability. And continued labor market woes. Recovering labor yes, but at a slow pace.

The central banker remains at the forefront around the globe. Bernanke really wants the world to jump on board his program for more bond buying. Will the foreign central banks also but mortgage backed securities. Will they invest in our housing? They just might.

That should ease unemployment.   But what about inflation? Are we against the inflation clock? The Fed does not expect inflation to go above 2% at all. Someone, somewhere has to be shaking their head and wondering what the Fed is taking. It really can't be a dose of reality, can it?

I feel the Fed has told the world that we are all in this together. Will all the players come to the table and play the Fed game? We shall see.

34 charts from theatlantic.com was used as a source story.

The markets are broken. So says Chris Martenson of Peak Prosperity. Because they are not sending any clear signals anymore. Speculators are now the majority in the market. Not good. Sure has been a swing from the investor type. Mr. Martenson went on to write that nothing can be reasonably prices when the central banker misprices money and buys up everything related to bonds. Nothing can be reasonably priced.

What we have is a printing money out of thin air scenario. This might as well be called QE4. It is to act as both monetary and fiscal stimulus. The main goal is to provide economic activity, especially home building. The goal is to reduce the unemployment rate.

The Fed is now in the business of funding nearly 100% of all new government spending in 2013. As it does so another $1 trillion will be pumped into the economy. Inflation has to come into play with this mix.

Benanke said the Fed policy is tied to the unemployment rate. We could have a very long wait for the stimulus to end. The participation rate comes into play like it never has before. Conflicting numbers to be sure. As more people leave the labor force the participation rate goes down so does the unemployment rate. When more jobs are created the unemployment rate goes down too.

This latest QE effort will be with for 2 to 3 years according to Martenson. The Fed is likely to add another $3-4 trillion to its balance sheet. That's 300 - 400 % more money in the next year than was created in the first 200 years after the Declaration of Independence.

The one item to watch is inflation. Can the Fed keep it up? We'll see.

Link to the source story.