Was the Fed’s Rate Raise a Good Decision?

Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

“Finally, the Fed made the right decision. It’s like removing price controls from the credit markets!” — Steve Forbes

Yesterday, my wife and I spent more than an hour in a private meeting with Steve Forbes at his company’s new world headquarters in Jersey City, New Jersey. (Forbes moved last year from its beloved offices on iconic 5th Avenue because taxes are so high in New York City.)

Steve Forbes and Skousen

Mark and Jo Ann Skousen meet with Steve Forbes in his new offices in New Jersey. Steve is holding a copy of my book, “The Maxims of Wall Street,” and I’m holding a copy of Mr. Forbes’s new book, “Reviving America.”

We were there to discuss next year’s big FreedomFest show in Las Vegas (www.freedomfest.com). Forbes is co-ambassador along with John Mackey, co-CEO of Whole Foods Market, and is always excited to attend and speak at FreedomFest. “I attend all three days — it’s the best place to find out what’s really going on in the world,” Steve told me.

Note! We’ve just sent out our first announcement about next year’s big show in Las Vegas, July 13-16, 2016. Our keynote speaker will be George Foreman, the former heavyweight champion of the world and knockout entrepreneur. Read all about him and our other speakers, panels and debates.

Before my wife and I ended our meeting with Steve Forbes, I asked him what he thought of the Fed’s decision to finally raise the discount rate. He was animated. “It’s about time,” he said, “for the Fed to stop keeping rates down artificially. It’s like price controls being lifted!”

I agree. The Fed has started to release its stranglehold on the credit markets by raising the discount rate for the first time in nearly a decade. That’s good news for the economy, the stock market and our portfolio as we enter an important election year.

Higher interest rates mean the economy is on the mend and getting back to normal. Wall Street rallied on the news. Can this trend continue into 2016? Historically, stocks have done well during an election year; if the Federal Reserve continues to stimulate the economy to get inflation going again, stocks could move higher.

Subscribers to my newsletter, Forecasts & Strategies, remain 100% fully invested in dividend-paying stocks and mutual funds.

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You Blew It! Fed Continues to Promote Inflation

Finally, the Fed made the right decision — to let the private bond and credit markets decide the appropriate level of interest rates. By raising the discount rate to between a quarter and half-quarter point, it introduced some flexibility into the economy. As Steve Forbes told me this week, the Fed’s action was a positive sign that it is loosening the private credit markets from government control.

The Fed’s decision sent an important signal to Wall Street, that the economy can stand on its own after the devastating financial crisis and Great Recession of 2008-09. As Fed Chair Janet Yellen opined, “With the economy performing well and expected to continue to do so, the committee judges that a modest increase in the federal funds rate is appropriate. The economic recovery has clearly come a long way.”

As a result, Wall Street rallied on the news and is now within reach of hitting new highs.

Is the Fed’s 2% inflation target a good idea? No!

Nevertheless, the Fed has still not given up its determination to depreciate our currency by deliberately promoting inflation with its 2% target rate. Far from a tightening monetary policy, the money supply (M2) continues to grow at a relatively high rate of 5-8% over the past year. Price inflation has not followed suit because of the oil glut and the fact that the U.S. dollar is the world’s reserve currency, meaning that the United States can export its inflation. So that probably means that the Fed will go overboard in promoting more inflation. The cost of living is already rising too fast.

People are losing confidence in the dollar. The U.S. Mint reported this week that it sold over 47 million American eagle silver dollars in 2015, a record. Last year, it sold 44 million American eagle silver dollars.

At the Newsmax Economic Forum in Miami last week, I asked the audience, “If you had to choose between the paper dollar and the silver dollar, both legal tender in the U.S., which would you choose?” Most chose silver. Smart move, especially with silver selling for only $14 an ounce.

Last Call for Best Holiday Gift for Subscribers!

Christmas is approaching, but there’s still time to order copies of “The Maxims of Wall Street” — the ideal holiday gift item. Unlike candy or wine, this gift offers a lifetime of sound investment advice with more than 800 sayings and dozens of short stories. As one subscriber said to me recently, “There’s more wisdom in your book than 4 years of college education!” And there’s even quite a bit of humor in “Maxims” — see for example page 25, “how to make a million.”

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You pay only $20 for the first copy and all additional copies are only $10 each. All will be personally autographed, and I pay the postage! I’m offering “half off” because I know “Maxims” makes a great gift for friends, relatives, business colleagues, investors, your favorite stockbroker and money manager. Many people order a whole box of 32 copies. The price of a box of books is only $300 postpaid. To order your copies at this super discount, call Ensign Publishing toll-free at 1-866-254-2057, or go to www.miracleofamerica.com/maxims.

Thank You for Joining Me for another Profitable Year!

I end this Skousen CAFÉ with a big thank you to all of the subscribers to my monthly investment newsletter, Forecasts & Strategies, as we have enjoyed another profitable year together. It has not been easy to stay fully invested in the face of a Chinese stock market crash, the slump in oil prices, terrorist attacks around the globe and constant doom-and-gloom predictions. Bull markets climb a wall of worry. But if you have held on, you are ahead of the game.

I’d also like to thank all of you who came to my annual FreedomFest show in Las Vegas in July and witnessed the biggest turnout ever (2,500 attendees) and major media coverage. I hope you will join us next year at the Global Financial Summit in The Bahamas, March 13-16 (gfs.freedomfest.com), and FreedomFest, July 13-17 (www.freedomfest.com). Both events are great ways to learn, network and celebrate liberty.

Upcoming Conference

Special Announcement: Subscribers to the Skousen CAFE should be happy to know that for the first time in two years, I am hosting the Global Financial Summit, a special private investment seminar, in The Bahamas. The focus will be on “High Income & Fast Money Investing” — combining my two most successful trading services!

My “All Star High Income & Fast Money” experts for this exclusive private meeting will include Alex Green, investment director of the Oxford Club and editor of three trading services (Momentum Alert, Insider Trader and True Value Alert). Alex is rated the #5 best investor according to Hulbert Financial Digest. I’ve also confirmed Martin Truax, vice president at Raymond James, whose “income & growth” portfolio has more than tripled during the past 10 years. He and his partner Ron Miller also have developed a highly successful trading system using “red” and “green” signals to determine when to get in and out of markets (they flashed “sell” in May and now are flashing “buy” — good calls!).

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Our keynote speaker will be Steve Moore, the chief economist for the Heritage Foundation and the #1 columnist for the Wall Street Journal, who will speak on “Money & Politics 2016: The Inside Story for Private Investors.”

Grover Norquist, president of Americans for Tax Reform, and Ziad Abdelnour, CEO of Blackhawk Partners, are two of the world’s top experts on Middle East politics and will tell us the truth about this neverending crisis and what it means to investors.

The dates are March 16-19, 2016, at the five-star Atlantis Resort on Paradise Island, Nassau, The BahamasThis is during high “Spring Break” season, so I urge you to make your flight reservations now.

I soon will be announcing more top experts in portfolio management, tax and estate planning and foreign investing. But I want to encourage you to sign up now and take advantage of our special “early bird” discount — $200 off the retail price for Skousen CAFE subscribers if you register by Dec. 31. The price is only $495 per person/$795 per couple with the discount. And hotel rates at the five-star Atlantis Resort are only $209 per night. We are limiting this private meeting to 200 attendees only. To sign up, call Karen or Jennifer at 855-850-3733 ext 202, email info@freedomfest.com or go to gfs.freedomfest.com.

In case you missed it, I encourage you to read my e-letter column from last week about how even Warren Buffett can’t always beat the market. I also invite you to comment in the space provided below.

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