Doing “The Twist’

At the last Fed meeting it was announced that the Fed would begin selling $400 billion of short toerm notes/debt and buying treasuries and mortgages with longer term maturities. The Fed Governors seemed to be mixed in their views on whether such a move will have any affect on the economy. Some feel that the move will not force investment and that it will not make interest rates drop further.

We at Evergreen feel that while the move will keep interest rates low longer it will not drop rates down to even lower levels. If rates do continue their downward trend it will be due to an ever failing Europe and a weak economy here at home. In other words, it will be the REAL economic issues that matter not a change in the Fed’s balance sheet.

Let’s face it $400 billion just isn’t that much money today and can’t move a stagnant, aenemic market on it’s own. Ultimately, what we need are jobs. Lots and lots of stable, good paying jobs. If we can get people back to work we can build confidence again and get people and businesses spending money again. The rest will take care of itself.

Sooner or later this WILL come to pass. (Hopefully sooner) When it does rates will rise, home prices will soar and those who didn’t take the plunge and buy a home or investment today will be left grumbling about how they always seem to miss the bottom of the market. Rememer this post when I tell you “I told you so”.

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