2011Sep26 What's a Fed to do?

"The Great Depression, like most other periods of severe unemployment,

was produced by government mismanagement rather than by any

inherent instability of the private economy."

 ~ Milton Friedman 

Economy:

Operation Twist has been put into action once more. It was first rolled out in 1961 and is named for the dance that was popular at that time. The Fed will begin to sell the shorter term treasuries on its books and buy treasury bonds with durations from six to thirty years. The goal is to further flatten the yield curve and lower interest rates. As their current roster of mortgage back securities rolls over, they will re-invest in similar holdings in an attempt to lower mortgage rates.

Will it work? Probably not to any substantial or sustainable degree. The problem with the economy is not that interest rates are too high. The Fed is trying to "fix" something that is not a problem and will not lead to any recovery. We need jobs, lots of them. That is the only thing that will bring confidence and spending back into the economy.

With the Baby Boomers turning 65 years old at 10,000 per day, the number of consumers focused on spending is continuing to drop. Most U.S. consumers are getting out of debt and saving for a retirement that is coming at them much faster than anticipated, a process known as deleveraging. There is nothing the Fed can do about this.

The economy will continue to contract. It does not mean disaster but it does mean changes need to be made. It is not business as usual for the rank and file. Focusing on preserving investment assets, biding our time, is of the utmost importance. There is no way to hurry this along, it is a generational change that will happen on its own schedule.

FYI:

Apple recently became the largest company on earth by market cap. What does that mean? How big a company are they? Let's take a look at "Things Apple is Worth More Than"

The entire National Football League - Times Ten

All of the gold at the New York Federal Reserve

The entire economy of Singapore

The Great Wall of China

All of the illegal drugs in the world

Total corporate income tax for 2011

Wow, that is big!

It has been written that if corporations adopt the Apple operating system its share price could double again.

Real Estate:

I guess it couldn't hurt. In this struggling housing market, any perks can help sell a home. An in-ground pool, walk-in closets, and marble counter tops can help sell a home -- but the newest trend is beer (via Top 10 Real Estate Deals).

That $1,000 of beer will stay in the fridge if you sign on the dotted line and buy one of two Canada homes.

The homes are listed in Calgary and the Hidden Valley.

The beer is listed as a homeowner's incentive, since real estate agents can't list beer as a perk.

Robyn Moser, of Maxwell South Star Realty, helped his clients come up with the idea after seeing a similar incentive offer increase the showings of a Chicago property 300 percent, according to The Calgary Herald.

In The Calgary Herald, Moser said, "This is less of an incentive but more of a promotion where they're building awareness and buzz around the property for sale, not pretending in fact that somebody's going to sign on the dotted line to get $1,000 in beer."