Fed Meeting Report
Research for Online Investors

by John Dalt

8/11/09

The Fed is meeting and will issue their report tomorrow afternoon. The market does not expect any change in current actions. The $300 billion purchase of treasury bonds is scheduled to end in September. So far, they have bought $253 billion with printed money.

Interest rates will hold steady at 0.00% to 0.25%  England announced more quantitative easing of the pound, putting a strain on the Euro.  The dollar has been strengthening.

The Fed’s program to buy $1.25 trillion in mortgage backed securities from Fannie Mae and Freddie Mac is slated to end in December.  They have bought $542.8 billion so far.

The Fed’s is charged with maintaining the value of the currency, economic growth, and optimum employment.  Rarely has an agency been as effective as the Fed…

The Fed's goal is to not do anything that upsets the market.  The dollar strengthening is not a problem, unless it goes too high.  The economy seems to be out of the woods, as the market is anticipating a third quarter recovery.

Non-farm worker productivity grew sharply in the second quarter.  Hourly compensation dropped, as layoffs targeted high cost, low production positions.

USA Today had a good article on the Fed and the Economy.

Good news runs rampant through the market; yesterday Freddie Mac (FRE) reported a second quarter profit of $768 million, after losing $9.9 billion in the first quarter.  Alas, if you change accounting rules, anyone can show a profit!  We can thank mark to market rule changes for the sudden turn in fortunes.  The stock rose 80%

Meanwhile, Fannie Mae (FNM) lost $14.8 billion.  They asked Treasury to inject $10.7 billion, as the loss was larger than the value of their shares.  Fannie Mae has now lost over $100 billion.

Congress is backing off ordering more private jets to ferry Nancy and her band of merry makers from hither to yawn.  They have backed off the $550 million, now they will have to settle for just $250 million worth of new Gulfstream’s.

Wholesale inventories were down in June; companies are waiting for sales rather than anticipating a recovery.  The year-to-year decline was the steepest on record, and inventory levels are at their lowest levels on record.  Low inventory levels should act as a spring when companies feel more confidence in future growth in sales, as they rebuild inventory.  As the old saying goes, “You can’t sell from an empty shelf.”

The debate over Oh! Bama care continues, the president went to New Hampshire this morning for a pep rally.  I was sent a great link yesterday, featuring Tom Price, R. Georgia.  Rep. Price is Chairman of the Republican Study Committee (RSC).

So much gets lost in the sound bites; you will enjoy five minutes of Tom Price.  I warn you, after one of his orations, you will end up watching more.  I wish I could claim him as my representative.

The RSC is a group of 100 conservative members of the House. Conservative is the key here, where are the rest of the Republicans in the House, or some of those fabled “blue dog” democrats? Check if your representative is on their membership list. Something else you might want to mention at a town hall meeting this month.

Subscriber A.A. wrote, “I saw a piece on PBS that companies would have to start hiring soon because they had cut too much.”  A.A. continued that she believes companies are weeding out the older, more expensive employees.

John:
The U.S. economy is a great engine, but we are choking on government regulation and intrusions.  Don’t expect a quick recovery.  When we see signals of improvement, the Fed is going to slap on higher interest rates, inflation will pickup, and unemployment will remain high.  If that sounds like stagflation, you have a good memory.

This quote comes to us from subscriber G.L.
“Blessed are the young, for they will inherit the National Debt.”
-----Herbert Hoover

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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