Fed Sets October End for Bond Buying

Federal Reserve officials agreed at June's policy meeting to end their bond-buying program in October, putting an explicit end date on the experiment for the first time and closing a controversial chapter in central-banking annals with results still the subject of immense debate.

Fed already plans to regulate banks to have more liquidity, i.e., buy government bonds...

So as the Fed has bought up all the more valuable private sector bonds, banks will be forced into buying freshly printed government bonds.

Private sector will be bilked again.

This may not be a short term problem from the fed. Obviously we were doomed to collapse from all the decades off deficit spending. The Question is just how soon will hyper-inflation occur? yes, it is best to get out of everything in the market right now and wait for at least a ten percent correction. In private I will tell you a stock to buy.
need to communicate. ASAP. PLS.

It’s easy to guess which way an interest rate increase might effect the market. The market will NEVER jump up at the sight of such an event and it’s long overdue for interest rates to be a bit higher, more like 5-6% for home loans and 12% for car loans. US bonds need to be 3-4% at a minimum and more like 5-7% to be sustainable.

For at least 3 decades my largest holdings have been tax exempt muni bond funds where the funds hold general obligation bonds exclusively. I prefer knowing that the local folks have voted on it and are backing it. These funds took a hit in 2008 along with everything else but only around 20%, not the 40+% that most other stuff took. We took another hit in 2011 when Meridith Whitney shot her mouth off about muni bonds in general without being specific about GO types.

There are plenty of those funds that pay over 6% tax exempt. If your concern is the interest rate increase that is bound to happen about Oct. when the Fed turns loose then you need to be light on any other funds that are interest rate sensitive. But the tax exempt munis will do just fine. Even if they drop with the market they will still pay just fine and if the general market corrects you will get a chance to buy some more paying a higher rate——using the cash you should be sitting on at the time.

Keeping some cash in the freezer is always good advice but keeping your portfolio simple is even better. And if you’re not making at least 6% tax exempt you’re just not paying attention, especially if you have other income that is exposed to a tax rate. Works for me and I will indeed be paying close attention as we close in on October.

There is right now more liquidity than can be handled. The banks have about $1 Trillion plus parked at the Fed.
If the Fed tries to unwind their portfolio the buyers may very well be the banks.
The reason the Fed has bought all that paper is to try and control Interest rates for Treasury Debt.
Any spike in rates, say 80 to 100 basis points, will add another $100 TO $200 Billion to the Interest cost in the Budget and before long all Tax revenues will be going to pay that cost.
The Fed has boxed themselves in along with the rest of us.

#24 Child of the 60s,

You have it! The _Reserve_ pretends to stop floating the system as other places like Belgium pick up the slack. This is just covert _Reserve_ activity and it will contunue floating the sinking boat thru any means possible. This included bailing you into. Coming soon to a USA near you.

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