The FOMC released its latest monetary policy statement.  As expected, the Federal Reserve will keep its target federal funds rate between 2.25% and 2.5%. Even though investors were not surprised, stocks boomed because the word “patient” appeared in the statement.

The statement reads, “…the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.”

Because of this one word, which indicated the possibility of less tightening in the future, stocks went up, long-term yields went down slightly, and gold went up.

It is hard to believe that one word in a policy statement can drive financial markets to such an extent.  But then again, if we look back to the Greenspan era, analysts were continually parsing his words to figure out whether to buy or sell.

The important piece of the FOMC statement is really the implementation note.  It states that the Fed will continue to roll off approximately $50 billion per month of maturing debt.  This is monetary deflation, and it is eventually likely to deflate the bubble from the previous monetary inflation.

Even though stocks boomed, the yield curve actually slightly flattened in some areas.  The 10-year yield fell just below 2.70%.  The yield curve hasn’t inverted yet, at least when comparing the 3-month to the 10-year.  However, it could easily invert in the matter of a couple of weeks if things start to get shaky again. We just don’t know if this is one last little run up before the big prolonged drop, or if we will see stocks test the all-time nominal highs again in the months to come.

Are You Basing Your Whole Financial Future on One Word?

There is something wrong with the big picture when one word – patient – drives the markets to this extent.  There is something wrong that this one committee controls the entire money supply for the richest country on the planet.  There is something wrong that they can distort interest rates (the price of money).  There is something wrong that a few people can cause a massive boom/ bust cycle.

The problem here is that your financial investments are reliant on a few words spoken by the central bankers.  Are you banking your whole retirement on the fact that Jerome Powell and company will calculate everything correctly?  Are you relying on the fact that they will use the right words, and the markets will react the right way, so that your portfolio goes up?

This is really no way to plan for your retirement.

This is why I recommend investing in a permanent portfolio, as described by Harry Browne in his book titled Fail-Safe Investing.  The permanent portfolio can give you peace of mind.  You don’t have to worry about stock market crashes or other economic events because of what the central bankers do. You can protect your portfolio from the central bankers who try to centrally plan an economy with 325 million people.

The permanent portfolio probably won’t make you rich by itself, but it will help protect the money that you have saved, and it will give you steady and more predictable returns.  There are fluctuations with the portfolio, but they are much smaller than if you were to invest in one asset class such as stocks.

I have written a short e-book on how to set up a permanent portfolio and possible ways to tweak it to fit your personal situation.  It is available on Amazon for just $7.99. If you take away one piece of advice from this book, it could save you thousands of dollars or more over the years.  Better yet, it can save you from a lot of anxiety about stock market crashes, or massive inflation, or other events.  That is why I sometimes refer to it as the “Sleep-at-night Portfolio”.

(This e-book is on sale for just $2.99 if you get it by January 31, 2019.)

Pick up this e-book and protect yourself and your financial future from the word “patient”, or whatever key word is used in the next statement or press release.  The free market should determine the money supply and interest rates, but unfortunately we currently do not live in that world.

Therefore, take care of yourself and do what you can, given the situation.  Meanwhile, hopefully more people will grow tired of these central bank manipulations, and one day we can have real money again as determined by the marketplace.