Now that the Fed has begun its rate cut crusade, you don’t want to wake up sometime down the road and realize you have no return on your cash. You and I have been talking about getting your lazy cash off the couch and working. Money market assets have gathered trillions of dollars and continue to do so even with rates just under five percent. What happens if the Fed cuts rates like it has in the past, enticing investors out of cash and into the only game in town—stocks? Have we not learned some lessons from the three market cracks so far this century? The Fed has a track record for cutting … [Read more...]

When you look at the abysmal track record of the Fed when it begins rate cuts of 50 basis points, it’s like boating in the fog. It doesn’t matter if you have the best navigational equipment. It’s not fun. Having been stuck in thick fog myself, I can tell you that minutes feel like hours, and hours feel like days. Sometimes, when it lifts, you’re good to go like we were this summer off Castle Hill. Other times, like when I was a kid, we dropped anchor to wait it out, and when the fog lifted, we found out that we were in a harbor that wasn’t even ours. Look at the record of the Fed when … [Read more...]

In a recent article in The Wall Street Journal, Sam Goldfarb explains the counterintuitive outcomes that have occurred after the Fed's rate cut. The crux of all this, I think, is here: “In fact, the choice might have even helped drive yields higher, according to some investors. In opting for the larger reduction, the Fed signaled that it was willing to fight to keep the economy out of a recession, which would almost certainly lead to even bigger cuts. At the same time, officials signaled they were optimistic about the economy and most likely will cut rates by only a quarter point at … [Read more...]

With the return on cash and money markets coming down, expect investors to look for ways to replace the juicy yields they’ve become accustomed to. Don’t blame the weatherman for the weather—invest for the safety you deserve. Understand that returns on cash will be lower but not terrible—at least not yet. But if the Fed gets its way and cuts down the forest of short-term rates, you want to be prepared. Action Line: There are still yields you can sink your teeth into. Get your lazy cash off the couch and put it to work. The hard part is beating inertia and acting. When you’re ready to … [Read more...]

Remember when former Fed Chair Alan Greenspan was referred to as “The Maestro” conducting the economy to a soft landing during the 90s? The only problem was when the music stopped, like it did during the Tech Bust earlier this century, hopes and dreams were crushed. The Maestro’s symphony could have been titled “This Time It’s Different,” lulling its listeners like the Pied Piper right up until the last movement that could have been subtitled “Turns Out, Not So Much.” Today, plenty of talking heads are cheering conductor Powell’s rate cut, but what if investors continue bidding … [Read more...]

Remember when the talking heads said to stay away from bonds? That the balanced approach was dead? Well, they were wrong. Not that I’m taking a victory lap, I’m not. Because now that the Fed has cut interest rates by a half point, fixed income investing just got that much harder. All those eschewing bonds this year and last may wish they had some maturities beyond the 6-month CDs that now, overnight, will be less appealing. But that’s not why you’re here. You want to know what this rate cut means to you. I’ll tell you. It means you better be prepared for the onslaught of ads selling … [Read more...]