As hoped, Janet Yellen, current Federal Reserve Vice Chair, was nominated today by the President to be the next chair of the U.S. Federal Reserve (Fed). She is expected to continue the easy money policies of the current Fed and may even extend its Quantitative Easing actions (QE3), where the Fed directly buys U.S. Government Bonds to lower interest rates. Unfortunately, she won’t take charge until March 2014 and by then, who knows what the condition of the economy will be if our political leaders continue to play with fire by shutting down the government, fighting but doing nothing about the Debt Ceiling or our National Debt.
Even if all the political issues surrounding the current debt, budget, and Obamacare debates are resolved, it does not change the very serious problem of our $17 Trillion National Debt and its related long-term problems of depressed growth. As a result, interest rates will continue to creep up and that will impact housing. Therefore, consumers considering the purchase of a house need to act soon before a rise in mortgage rates cuts them off from low rates and affordable home prices.
Investors have felt the pain of the Washington “Poker Game” mentality as the stock market (S&P 500) has dipped 4% in the last 2 weeks. Our cautionary views have been confirmed, and we remain cautious believing that better buying prices for stocks, mutual funds, and ETFs are in the near future.
Our TSOA Freedom Portfolio allocations remain negative for long-term and mid-term bonds. Equity allocations remain unchanged. Keep money market funds ready to allocate to equity and alternative bond investments (REITs, MLPs) when conditions are right to do so.