All Eyes on the Fed
Research for Online Investors

by John Dalt

3/16/10

The Federal Open Market Committee (FOMC) is meeting today.  This is the first one-day meeting since 2008.  Their statement will be issued after we have already sent our letter to your mailbox.  Investors and traders are waiting to parse the statement, looking for any indication of credit tightening.

They really don’t have to look too hard. The Fed announced last year that the purchase of mortgage backed securities (MBS) would end March 31st. Everyone knows this will end, but I suspect it is not priced into the market, yet.

School children act better on the playground when a teacher is present, because they know the monitor will participate if they get too rowdy. The Fed’s deep pocket has been present since early 2009 to keep interest rates down, what will happen when bond buyers know there is not a limit on successful bids?

Psychologically, a buyer that only buys to keep a lid on rates has a powerful influence on prices. Bidders know they can only bid so high to have any success, without that bidder placing a ‘cap’ on the bids, watch for rates to move higher to sell all the securities that MUST be sold.

HousingWire, the mortgage industries news magazine compared the Fed’s purchase of MBS as “training wheels on a child’s bicycle…which cannot keep the vehicle stable forever.”  Bill Gross, the Bond chief at Pimco, said “It is a trillion and a half dollar check that won’t be there…  How that affects the markets?  We don’t know…I am not eagerly anticipating the answer, but I think it holds some surprises…  We could miss the money, put it that way.”

Speaking of "missing money."  The Treasury department announced yesterday that China reduced their holdings of U.S. debt in January for the third month in a row.  China now holds $889 billion in U.S. Treasuries, $5.8 billion less than in December.  Also, net foreign purchases of U.S. corporate debt fell $24.8 billion in January.  This is the largest drop on record.

The next two weeks could see the highest prices for MBS and Treasuries we will see in 2010. The Fed withdrawal from purchasing MBS could impact ANY long term investments you hold in your portfolio. As interest rates rise to attract investors, it will put pressure on other investment price/earnings ratios. The possible negative effects on the stock market should not be minimized. We will watch this and bring you our best information as more comes available.

We prepared the following tongue in check press release, but could not convince our publicity company to release it.  We wanted to share it with you, and the time seemed apt, as Tiger Woods has announced he would play in the Master’s Tournament in April.

Tiger Woods could become Official Spokesman for Galtstock.com

Wichita, Ks (March 2, 2010)  Galtstock.com has contacted IMG by email to offer $100 dollars (green money) for Tiger Woods to become our official spokesman for one month.

John Dalt, galstock’s founder said, “I just thought with all these other sponsors cancelling on him we might be able pick him up on the cheap.  We won’t ask him to do much, maybe a golf class for spoiled rich kids, an appearance in Alaska or maybe overseas for our customers.  You know, a meet and greet.”

IMG hasn’t jumped at the offer.  Not one to be deterred, Mr. Dalt vows to meet with his accountants and try to sweeten the deal, “We are going all out, I mean, what do you think he’s worth?  $500 a month?  I guess we could go that high if he pays his own travel expenses.  It has been a tough year on Wallstreet, and Washington is raising taxes on anything that moves.”

One idea floated by the sales department is to dedicate $10 from every new Long-Term Portfolio service subscription to a “Bonus Pool for Tiger”.  The service only costs $99 dollars a year, a hundred bucks off the regular price.  Subscribers would still receive stock monitoring, alert service, weekly recaps and monthly recommendations.  John Dalt said, “I’ll go along with the $10 bucks for a week or two, but no longer…I don’t want him getting rich on us!”  The Long-Term Portfolio returned over 25% last year.

You can do your part to help us up the ante for Tiger, subscribe and we will put $10 bucks in the “Tiger Pool.”  If we can’t put together a deal, we’ll use the $10 bucks for a nice certificate (suitable for framing) with your name on it as one of “Tiger’s Kittens.”  You’ll get it back in the mail.

To find out more please visit the website at: http://www.galtstock.com

About Galtstock.com

Galtstock.com does NOT accept consideration from ANY company or firm to promote a stock.

John Dalt
www.galtstock.com

Our new Spokesman?

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions. It may contain errors and you should not make investment decisions based solely on what you believe you have read here. Do your own research, it is your money. If you lose it, it is your responsibility, not ours or your grandmothers! The editor may or may not have a position in any securities discussed. The editor may have held a position in a security earlier, or in the future.

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