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KC Fed President Warns of Looming Bubbles

MARKET UPDATE

Index Price Chg %

Dow 14,511 55.98 0.39%

NASDAQ 3,254 25.09 0.78%

S&P 1,558 10.37 0.67%

Gold 1,606 4.8 0.30%

Oil 93.24 1.08 1.17%

From: Uncommon Wisdom([email protected])

Sent: Wed 3/20/13 9:53 PM

To: [email protected]

March 20, 2013

Fed, Markets Stay the Course ... KCFed President Warns of LoomingBubbles ... Consumers Still Love

BlackBerry ... Starbucks BuysCoffee Farm

Dear Emilio,

The Federal Reserve wrapped up two days of meetingstoday. Follow-up comments from the Federal OpenMarket Committee show were in for more of the same:

The Fed will continue its $85 billion in monthly debt

purchases for the foreseeable future.

The Fed left interest rates unchanged, as they have done since 2008, and will untilunemployment rate drops to 6.5% and inflation rises to 2.5%. (The currentunemployment rate is 7.7% while last months inflation rate was 2.0%.)

For markets intent on charging higher, this was a good enough reason to stay thecourse as well that is, to resume their upward march. The Dow, S&P and Nasdaq allended the day in-the-green.

Also holding steady was Kansas City Fed President Esther Georges concern thatkeeping interest rates near zero for an extended period introduces the risk of bubbles.

(She was the sole dissenter during the J anuary meeting as well.)

George argued that the Feds current course produces financial instability.She citedthe prices of bonds, agricultural land and high-yield loans as signaling marketimbalances, as they are all at historically high levels.

That may be true. But famed buy-and-hold-forever investor Warren Buffett says it will bea very interesting daywhen the central banks reverse their current course becausewhen the extra money from the Fed dries up, money managers will start selling inearnest.

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In the meantime, while the rates are held near zero by the Fed, theres a lot of money tobe made in the markets. And investors would be wise to keep taking advantage.

Low interest rates have been good to gold throughout the Feds QE program so far. Withinterest rates so low, investors arent getting worthwhile returns on their investments inbonds or savings accounts. The lack of solid returns in traditionally safe assets hasdriven investors to gold, who view it as a better alternative.

As the Fed prints more money, further devaluing the dollar and creating future inflationconcerns, investors will seek an alternative investment to fiat currencies, and gold isalways their first choice. Watch my latest video on gold.

Other Market News:

To show that Chairman Ben Bernanke isnt completely out-of-touch with the worldaround him, he said that I dont think the impact (of Cyprus) has been enormouson the markets.

The Dow Jones Industrial Average hit a fresh intraday all-time high of

14,546.82 as investors moved their attention away from Cyprus after two days ofselling pressure. The S&P 500 traded within 10 points of its all-time high reachedin 2007.

FedEx (FDX) slipped 6.89%, to $99.13, after cutting its 2013 earnings forecastdue to increasing competition from cheaper international services. The companynow expects earnings for the fiscal year to be between $6 and $6.20 per share,down from earlier projections of $6.60 per share. FedEx also announced plans totrim capacity in Asia in response to weakening revenue in the region and will alsoconsider grounding some planes.

Shares ofResearch In Motion (BBRY)jumped 6.45% to $16 following anupgrade to Buyby Morgan Stanley. Morgan Stanley is confident the release ofthe BlackBerry Z10 this Friday on AT&Ts (T) network will give the company aboost. The Z10 will be available for Verizon Wireless customers next week.

T-Mobile is scheduled to carry the phone but no date has been announced.

Starbucks (SBUX) just bought a 600-acre coffee farm in Costa Rica, where it willdevelop new coffee. This move probably wont make the price of a tallanysmaller, although shares gained 1% (to $57.43) in todays trading. But it shouldhelp the company serve its thirsty customers in the U.S. and its soon-to-be-second-largest market, China.

Good Luck and Happy Investing,

Brad HoppmanPublisherUncommon Wisdom Daily

About Uncommon WisdomFor more information and archived issues, visit http://www.uncommonwisdomdaily.com


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La tasa de interés en EE.UU. a casi cero