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Robert Rodriguez: ALL IN!

September 15, 2012
GuruFocus

GuruFocus

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This is the latest commentary from Bob Rodriguez: The Fed initiated QE3 today by announcing its plan to buy $40 billion per month of agency mortgage-backed securities, finishing Operation Twist by year end and keeping the federal funds rate at 0 to ¼ percent through at least mid-2015. Additionally, “If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability.” With this statement, the Fed has gone “ALL IN!”

The Dow Jones Industrial Average responded by renewing the “Risk On” trade with a 206 point rally. The Fed’s actions have raised the ante for investment professionals and other organizations where their portfolios are under invested or “under risked”. With little time remaining in this investment year, the pressure on money managers to do something has become more intense. Needless to say, these monetary intrusions are just more of the same and the Fed Chairman is trying to bludgeon the market into taking risk. The key question is, “Will it work?” In the short-run, the Fed can win. In the long-run, will there be costs or disruptions for the economy and investors from these actions?

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