In a so-called seasonally light week of events, earnings, and Economic numbers, we decided to also go light with our charts of fun, here and here. Bernanke turned a light week into a very important one.
Bernanke Begins the Taper
On Wednesday the FOMC lead by Ben Bernanke as outgoing chair (Janet Yellen takes over at the end of January 2014) found enough evidence in the Economic tea leaves to slow the stimulus currently in the form of $85 Billion in monthly fixed purchases, artificially lowering interest rates (lowering from $85 Billion to $75 Billion monthly.)
Markets cheered more than we expected and interest rates have behaved post Bernanke taper. We have been wanting this to begin since summer and were very unhappy when the FOMC passed just before the government shut down. Maybe the relief we felt was also shared by other market participants and they responded by bidding markets higher. Time will tell!
TODAY IS FRIDAY and that means the end of another terrific week and the beginning of a Holiday Shortened two weeks. Next week the office will be closed on Christmas through the weekend. The following week is also a partial week with New Year’s landing in the middle. Suffice it to say money will be moving MUCH slower as skeletal crews will be manning all stations.
We will remain lightly tethered and ask if you have an emergency you email us!
Remember to spend time with those special in your life …. it seems only minutes ago we were welcoming all to 2013!
Best wishes and Season’s Greetings!!!
John A. Kvale CFA, CFP
http://www.jkfinancialinc.com http://www.street-cents.com 8222 Douglas Ave # 590 Dallas, TX 75225
December 2013 Monthly Review (Video)
Welcome to our Monthly review video where we look back each month and highlight important items and MAYBE few crumbs the crowd missed.
http://youtu.be/KdQbx6fSWmI
Click here if all else fails
Vimeo if all all else fails.
Bernanke Begins Removing the Punchbowl
In surprise move the FOMC zigged a little and threw the street off (present party included) by slowing the asset purchases by $10 billion monthly in December. Our thinking was skeptical of this move due to the Bernanke sunset term (Janet Yellen takes over in late January) and the moderate economic numbers. No matter the reason, we are very happy at the move as were market participants.
Recall the FOMC had instated a $85 billion monthly asset purchase to artificially lower longer term interest rates in order to stimulate the economy, especially housing. Their announcement included not only at $10 billion trim of asset purchases to $75 billion monthly but also the vague intent to continue the declined purchases at each of the FOMC meetings in 2014, thereby being completely out of the asset purchase game by year-end 2014 …. if all goes well. Horaay we say as we have desired this slowing of stimulus for some time.
All eyes including ours will be watching the 10 year treasury rate (below, a multi-year chart of 10 year treasury), mortgage-backed security rates and Municipal Bond rates. We desire a smooth increase, of course markets can be vicious, so outcomes may be different…. So Far so good!
Goldilocks is in the House … A Strong December Finish
There is nothing more that can be said about much of 2013 other than, not too hot, not too cold….just perfect….Oh I am sorry that is little Red Riding Hood…well the shoe may fit. 2013 may go down as the Goldilocks, Little Red Riding Hood year in many books with December capping off a sugary ice cream topping desert year.
Not to steal too much from our pending Newsletter, but 2013 was a VERY friendly equity capital market. Unfortunately it just does not always work that way. Sometimes it giveth and often times it taketh…. Attached is a chart showing the draw downs annually. Notice how small 2013 was/is.
Diversification Will Always Win
As we say goodbye to 2013 and especially December, we wanted to re-iterate the MOST important item in investing in the current economic and political condition is to stay diversified. While we lean in certain directions, we always recommend a toe in most collective investment waters for safety, participation and good long-term outcomes. It is never a good idea to have all our collective chickens in one basket!
Have a Great Day!
John Kvale CFA, CFP
8222 Douglas Ave # 590 Dallas, TX 75225 http://www.jkfinancialinc.com http://www.street-cents.comShare this:
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Posted in General Financial Planning, Investing/Financial Planning, Market Comments, Video
Tagged 10 Year Treasury, Bernanke, Goldilocks, Janet Yellen, MBS, Mortgage Backed Securities, Muni Bond Rates, Red Riding Hood