As Fed Chief, Yellen will Leave Bernanke’s Policies Intact

[Cartoon: Janet Yellen printing money]

by: Doug Fabian

Last week, the smart money was focused mostly on the testimony of Federal Reserve Chair nominee Janet Yellen, as she faced questions from the Senate Banking Committee during her confirmation hearing.

Now, to say that Yellen was extremely “dovish” is an understatement. In fact, Yellen seemed to discount any notion that the Fed’s massive quantitative easing, or QE, programs will create asset bubbles, either in the housing market or the equity market.

Yellen actually told lawmakers, “Stock prices have risen pretty robustly… [but] you would not see stock prices in territory that suggest… bubble-like conditions.”

Really?

This sounds just like current Fed Chairman Ben Bernanke to me. In the back of my mind, I am hearing the lyric from The Who classic, “Won’t Get Fooled Again,” that cries out: Meet the new boss/Same as the old boss…

My incredulity aside, the Yellen testimony basically cements the notion that there will be no “taper” this year, and I suspect we won’t see any pulling back of the Fed’s $85-billion-per-month bond-buying program until well into next year. Of course, the Fed always leaves itself the “data dependent” out, so my thesis could change if the data gets stronger. Still, I think we are in for more of the same with a Yellen-led Fed, and that’s music to Wall Street’s bulls.

SPX_112013

The other big news that’s influenced markets since our last Making Money Alert came out of China, as that country’s policymakers announced several big reforms. The biggest reform was the loosening of the country’s one-child policy, a move that would allow couples to have two children if one of the parents is an only child. This policy reversal made big headlines, but that wasn’t the most important in terms of the markets.

Exclusive  U.S. Stocks Drop to One-Month Low as Economic Data May Push Fed to Taper

FXI_112013

Of greater import for stocks were the proposed reforms in China’s financial system. China says it will create a system for insuring bank deposits and create a legal path for bankruptcy. The country also plans on easing price controls on industries such as energy, telecommunications and water. There also were hints about easing restrictions on offshore securities investments and mergers and acquisitions.

The China reforms caused a big move higher in China-focused funds, especially the iShares China Large Cap (FXI). That fund is up more than 9% over the past five trading sessions, a clear sign that Wall Street has embraced the changes on tap in the world’s second-largest economy.

Right now, subscribers to my newsletter are benefitting mightily from an allocation to China-based funds. To find out how, I invite you to check out Successful Investing right now.

Friedman on Money Printing

“Only government can take perfectly good paper, cover it with perfectly good ink and make the combination worthless.”

–Milton Friedman

The brilliant Nobel Prize-winning economist had a knack for putting things into entertaining perspective, and he does so here with his thoughts on quantitative easing before that technical term even existed. If more economists could express their thoughts as well as Friedman, there would be a whole lot higher level of economic literacy in the world.

Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow Making Money Alert readers, send it to me, along with any comments, questions and suggestions you have about my audio podcast, newsletters, seminars or anything else. Ask Doug.

Exclusive  ETF Talk: Can You Trust Technology?

In case you missed it, I encourage you to read my e-letter article from last week about the implications for investors of Janet Yellen’s nomination as Fed chair. I also invite you to comment about my column in the space provided below.

Like This Article?
Now Get Doug's FREE Special Report:
The New Gold Rush of 2016-2017

With gold already up 20% in 2016, one of the best market timers in the business sees even bigger things ahead. His free special report will show you how to play the coming “gold rush” for serious profits.

Get Access to the Report, 100% FREE


img
previous article

The European Central Bank is ready to consider negative interest rates on overnight bank deposits.

PREMIUM SERVICES FOR INVESTORS

Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen publishes 4 different investment newsletter advisories, including the award-winning Forecasts & Strategies, which has beaten the market over the last 15 years.

Product Details

LEARN MORE HERE

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays. Bryan's four newsletter and trading services include:

Product Details

LEARN MORE HERE

Nicholas Vardy

A Stanford and Harvard Law graduate, Nicholas Vardy scours over 40 different global markets every day to uncover new profit opportunities for subscribers. His 3 advisories and trading services include:

Product Details

LEARN MORE HERE

Doug Fabian

A 30-year Wall Street veteran and famed market timer, Doug Fabian is one the nation's foremost experts on ETFs (Exchange Traded Funds). His two ETF-focused advisories include:

Product Details

LEARN MORE HERE

Bob Carlson

In Bob's monthly newsletter, Retirement Watch, he provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

LEARN MORE HERE

DividendInvestor.com

Used by financial advisors and individual investors all over the world, DividendInvestor.com is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

LEARN MORE HERE