The Fed's Buying Spree... Is It Real

Earlier this month the Federal Reserve announced that it will purchase $600 billion worth of bonds, in addition to it's already existing operations, with the hopes of, raising inflation. With most rates of interest already below real time inflation rates of 3-4% per annum, why on Earth would the Federal Reserve want to raise inflation, and thereby lowering the returns of hedge funds, mutual funds, 401k(s), 529's and other investments?

A piece by George Will in the Washington Post says, "The Fed's large, and sufficient, original mission was to maintain price stability - to preserve the currency as a store of value. "Mission creep" usually results from a metabolic urge of government agencies. The Fed, however, had institutional imperialism thrust upon it when Congress - forgetting, not for the first or last time, its core functions - directed the Fed "to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates." The last two goals are really one. In the pursuit of the first, which requires the Fed to attempt to manage short-term economic growth, the Fed has started printing $600 billion - this is the meaning of what is called, with calculated opacity, 'quantitative easing.'.

What that means is that there is bound to be trouble at the Federal Reserve, with both this mandates. How does the government accomplish one without hurting the other? This goes to the heart if what exactly is the purpose of fiscal and monetary policy, and which has supremacy. Which policy is best for the country at this point in time in the country's history? With the 111th Congress on it's way out and the 112th not sure which to put first, its own political ambitions or the well being of the country. We have to influence our elected officials to make the choices that are best not just for the lower income class, or the middle class, or the wealthy, but for our future generations who will bear the brunt of our choices.

It's A Crazy World Out There

      Its no time to be in stocks and bonds. There will be rapid inflation, and politicians, of both parties have totally screwed us over and forgotten about us. These are some if nit all of the things that advisors are telling their clients. Advising their clients to hold gold, real estate, art, or some other non-income producing asset. I wonder do these advisors take heed to their own advice, or perhaps the advice if THEIR advisor, who says the same thing. If so, then things are crazier than I first believed.
      There is 24 hour news, 24 hour trading, 7 days a week commentary, and yet, 95% or more of mutual funds do not beat the market averages. The even crazier part is that there are trillions of dollars in between mutual funds, index funds, and exchange traded funds, and not only are the institutions content with less than stellar returns, but so are the millions of retail customers of brokers. This truly is a crazy world.
      There are a few people that stand out from this crowd however. Not only do they stand out, but they also stand alert from each other most of the time. They are called value investors. There is dispute about the true definition of value investing. There is even dispute about the correct technique, or some other detail. However, these people speak with one voice, loudly, when they say that a value investor is someone who looks at securities as parts of a business. They speak resolutely when they say that they do not follow the market, that it's to be used and not obeyed. They speak definitively when they say that they will buy a business for so much less than they think it is worth, that they'll still make out ahead.
      What I find to be MOST crazy is that there are not many in this crowd. Some people can understand, grasp, and jump on board with value investing, most van not. I am glad to say that I am one of those that can. There are great ones and up and coming ones. There are mentors and guiders, then there are leaders and great thinkers. Value investing is mostly sound business analysis, and then business buying, sometimes wholly most times fractionally. But always with rationale, intelligence, and cleat thinking. I wish that I could say things are easy being a value investor, but I can only spay it's simple. I also wish I could say that value investing made sense to everyone, but I can only say that it's a crazy world out there...so glad I'm not a part of it.  

New Beginnings

I had to take time to reflect on the value and content that I can offer with this blog. I have set forth several principles that I work forward to stick by throughout my time in the business and investing community, namely the blogosphere. With no further ado, here they are.

1. To present my investment ideas and rationale in a clear manner that can, and will be, challenged, critiqued, and analyzed.
2. To present myself, through my writings and rationale, as an astute follower and practitioner of the tenets of value investing.
3. To introduce myself to the value investing community and to educate and introduce others to value investing period.

These are my goals and I look forward to following them as long as I have this blog, and whatever other endeavors thereafter. I also look forward to constructive criticism, ideas, suggestions, as well as advice and encouragement.