Best of the Week
Most Popular
1. Will Gold Price Breakout? 3 Things to Watch… - Jordan_Roy_Byrne
2.China Invades Saudi Oil Realm: PetroDollar Kill - Jim_Willie_CB
3.Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - Nadeem_Walayat
4.The Stock Market Trend is Your Friend ’til the Very End - Rambus_Chartology
5.This Isn’t Your Grandfather’s (1960s) Inflation Scare - F_F_Wiley
6.GDX Gold Mining Stocks Fundamentals - Zeal_LLC
7.US Housing Real Estate Market and Banking Pressures Are Building - Chris_Vermeulen
8.Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - Buildadv
9.Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - Nadeem_Walayat
10.Warning Economic Implosion on the Horizon - Chris_Vermeulen
Last 7 days
Stock Market Predictive Modeling Is Calling For A Continued Rally - 22nd Apr 18
SWEATCOIN - Get PAID to WALK! Incentive to Burn Fat and Lose Weight - Review - 22nd Apr 18
Sheffield Local Elections 2018 Forecast Results - 22nd Apr 18
How Long Does it take for a 10%+ Stock Market Correction to Make New Highs - 21st Apr 18
Sheffield Ruling Labour Party Could Lose 10 Council Seats at May Local Elections - 21st Apr 18
Crude Oil Price Trend Forecast - Saudi Arabia $80 ARAMCO Stock IPO Target - 21st Apr 18
Gold Price Nearing Bull Market Breakout, Stocks to Follow - 20th Apr 18
What’s Bitcoin Really Worth? - 20th Apr 18
Stock Market May "Let Go" - 20th Apr 18
Overwhelming Evidence Against Near Stock Market Grand Supercycle Top - 20th Apr 18
Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - 20th Apr 18
The Incredible Silver Trade – What You Need to Know - 20th Apr 18
Is War "Hell" for the Stock Market? - 19th Apr 18
Palladium Bullion Surges 17% In 9 Days On Russian Supply Concerns - 19th Apr 18
Breadth Study Suggests that Stock Market Bottom is Already In - 19th Apr 18
Allegory Regarding Investment Decisions Made On Basis Of Government’s Income Statement, Balance Sheet - 19th Apr 18
Gold – A Unique Repeat of the 2007 and How to Profit - 19th Apr 18
Abbeydale Park Rise Cherry Tree's in Blossom - Sheffield Street Tree Protests - 19th Apr 18
The Stock Market “Turn of the Month Effect” Exists in 11 of 11 Countries - 18th Apr 18
Winter is Coming - Coming Storms Will Bring Out the Best and Worst in Humanity - 18th Apr 18
What Does it Take to Create Living Wage Jobs? - 18th Apr 18
Gold and Silver Buy Signals - 18th Apr 18
WINTER IS COMING - The Ongoing Fourth Turning Crisis Part2 - 18th Apr 18
A Stock Market Rally on Low Volume is NOT Bearish - 17th Apr 18
Three Gold Charts, One Big Gold Stocks Opportunity - 17th Apr 18
Crude Oil Price As Bullish as it Seems? - 17th Apr 18
A Good Time to Buy Facebook? - 17th Apr 18
THE Financial Crisis Acronym of 2008 is Sounding Another Alarm - 16th Apr 18
Bombs, Missiles and War – What to Expect Next from the Stock Market - 16th Apr 18
Global Debt Bubble Hits New All Time High – One Quadrillion Reasons To Buy Gold - 16th Apr 18
Will Bitcoin Ever Recover? - 16th Apr 18
Stock Market Futures Bounce, But Stopped at Trendline - 16th Apr 18
How To Profit As Oil Prices Explode - 16th Apr 18
Junior Mining Stocks are Close to Breaking Downtrend - 16th Apr 18
Look Inside a Caravan at UK Holiday Park for Summer 2018 - Hoseasons Cayton Bay Sea Side - 16th Apr 18
Stock Market More Weakness? How Much? - 15th Apr 18
Time for the Gold Bulls to Show their Mettle - 15th Apr 18
Trading Markets Amid Sound of Wars - 15th Apr 18
Sugar Commodity Buying Levels Analysis - 14th Apr 18
The Oil Trade May Be Coming Alive - 14th Apr 18

Market Oracle FREE Newsletter

Trading Lessons

How to Protect Your Portfolio from the US Fed Rear View Mirror Actions

Portfolio / Global Stock Markets Jun 03, 2008 - 09:01 AM GMT

By: Keith_Fitz-Gerald

Portfolio

Best Financial Markets Analysis ArticleThere's one thing you can almost always count on with the government: Coming late to the party.

The release of the U.S. Federal Reserve's minutes from the April 29 and 30 meeting of the Federal Open Market Committee (FOMC) included several “pronouncements,” none of which you're hearing from the mainstream press and all of which we here at Money Morning told you were coming months ago.


Four things to think about:

  1. The Fed's doom and gloom forecast of 0.3% to 1.2% gross domestic product (GDP) growth represent the FOMC's views from over a month ago. Since then, we've had a meager round of data showing that a recovery may be building and that there is, in fact, growth. First-quarter GDP was revised upward to 0.9%. And while that might not be as high as some would like to see, it's still growth… and right on schedule for a possible late-2008/early-2009 pickup.
  2. Investors who are looking to the Fed for guidance are driving with their rearview mirrors. The Fed's data is almost always delayed more than the markets, which means that the smart money has most decidedly and almost certainly priced in the Fed's “news” months ago. Smart investors have already been taking positions. In fact, that's what they have been doing since the March 17 lows. They're also waiting with baited breath for further deterioration in the Fed's next comments as a result of higher oil prices in recent days… so they can buy in at even better levels.
  3. All inflationary measures are rising and have been for over a year now… despite the fact that the Fed has apparently only just recently noticed inflation is rising faster than it would like. And it explains why commodities, some consumer durables and other traditional hiding places continue to defy all odds and rise despite record high valuations like oil, for example.
  4. The Fed isn't running the show and never has, despite what the media and most people seem to think. And “nowhere,” as legendary investor Jim Rogers pointed out when I talked with him recently at his home in Singapore, “does the Federal Reserve Act say the Fed is supposed to bailout Wall Street.” Which means that uninformed investors may be reading something into the Fed's actions that the Fed itself isn't charged with.

Federal Defense

Now here's what to do:

First, when the markets get sideways and uncertain, it's important to realize that having the proper portfolio structure will save the day - regardless of who's at the helm (big money) and who might think he's at the helm (Fed Chairman Ben S. Bernanke),

And by “structure,” we don't mean individual stocks or allocation. Instead, what you need is an assemblage of stocks concentrated on the trends of the time, such as energy and inflation, for example.

Traditional diversification, while better than nothing, is just a proxy for having no clue about how to select smart investments. It's like rearranging the deck chairs on the Titanic. It might look pretty, but it doesn't work when the entire market goes down at once, as so many investors found out between 2000 and 2002 and again recently.

Structure, on the other hand, is a deliberate attempt to manage risk. That's why famous investors like Berkshire Hathaway Inc. ( BRK.A , BRK.B ) Chairman Warren Buffett , George Soros , John Templeton and Jim Rogers concentrate their risks, rather than just spread their money around willy-nilly. [Editor's note: Click here to find out how you can obtain a free copy of Jim Rogers' new best seller, " A Bull in China ."]

Not only do certain sectors bounce faster but they also fall less. And those same sectors can kick off huge income as they go, which means that investors who “buy” into this argument are ahead of the game far sooner than those who don't.

Second, pay particular attention to unstoppable global trends. Then place money squarely in front of where they meet. This is not rocket science. For instance, the world's electrical systems are antiquated or nonexistent, which means they need to be updated and simply built in the first place to meet demand. Which is why there's an estimated $16 trillion behind the trend.

Other “unstoppable trends” include the emergence of China, inflation, energy, and even war, which, in a sad testimony to our times, is a growth industry.

Third, think like a plumber. A little water in the wrong part of your house can do a lot of damage, so it's important not to let it get out of control in the first place. We're not referring to micromanaging a longer-term portfolio here, but unless you're a day trader or even a swing trader, there's no reason to be constantly tweaking your portfolio in search of smaller profits when it's the bigger picture that matters.

News and Related Story Links:

By Keith Fitz-Gerald
Investment Director

Money Morning/The Money Map Report

©2008 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Keith Fitz-Gerald Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Chris
03 Jun 08, 14:41
Elaborate on Federal Defense

While your article on "Federal Defense" was interesting and made sense you never discussed what are the specific themes and companies in that structure. It was all generalities with no substance. Can you please elaborate?


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules