Dont Fight The Fed

One of the great truisms of Wall Street is "Don't fight the Fed". For the long term investors this has resulted in greater profits. When the Federal Reserve Board hikes interest rates look out and when the do it 3 times in a row it is called "3 jumps and a stumble". We have just gone through the stumble and it has been costly.

When you go back in history you will find that the stock market has almost always gone down substantially after the Fed has jumped interest rates 3 time in a row. As of this writing the Fed has lowered rates twice and we are looking for a third cut very soon. When that happens you will know that there is very little likelihood of the market going lower.

The stock market moves more on anticipation than fact. Another old saying is "Buy the rumor and sell the news". Because of what Mr. Greenspan has done we anticipate the market will rally and the rumor is he will do it again so we have two reasons to think that stock prices will move higher. He caused all this mess and now we look to him as our savior. It should be as the Queen of Hearts said, "Off with his head". Unfortunately he is appointed and cannot be removed from office even by the President. Just don't give him undo credit for lowering interest rates when he should not have raised them in the first pace.

For the smart long term investors when they see the Fed raising interest rates they should immediately pay attention top their stock and mutual fund holdings with the idea of selling them and placing the funds in a money market account. The investors won't be making any capital gains, but they also won't be standing in front of the train as it comes barreling down the track and runs them over. No, you don't have to sell immediately as it takes several months for interest rate increases to take effect - usually about 9 months.

When rates are lowered there will also be a time lag of 6 to 12 months which gives you opportunity to start picking some winners for the next bull market. Forget that Wall Street conventional wisdom of "do your research". Research is basically worthless. If you can find it out then everyone else already knows it and it has been reflected in the price of the stock. Let me give you a method that is too simple for your broker. He will tell you it won't work except it does.

Every Friday there is a listed in Investor's Business Daily on the back page about 40 charts of the week's best performing stocks. Notice they are all in uptrends. You could buy almost any one of these and check it weekly to see that it remains in the trend. When it falls out, sell it.

There are other equally simple methods your broker will not recommend. They want to keep the Wall Street mystique. Once you find out how easy it is to make money you won't need them. It is your money. Are you willing to work a little to make it grow?

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.

Copyright 2005

http://www.mutualfundmagic.com; 1-888-345-7870

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