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The biggest Central Bank set to pump -- billions more into government -- and mortgages my next guest says monetary policy purgatory is over and investors sitting on the sidelines.
Well the missing out joining us now Michael Jones chairman and chief investment officer of riverfront investment group.
Michael thank you for joining us are you saying -- what the Fed is doing is a good thing or you just from a purely investor's standpoint it's time to jump in the market.
-- I think for equity investors what the Fed is doing is unquestionably -- good thing.
Remember that from the time we first learn the word quantitative easing back in February and march of 2009.
The markets up about a 125%.
So we can question whether or not we we like the Fed's policies from a long term inflationary perspective.
But when they print money equity markets like it.
We have a saying at at riverfront don't fight the Fed and right now with 85 billion of new money coming into the market you're fighting them if you're on the sidelines.
But you know critics -- argue that flooding the system with liquidity.
Essentially means that we know the price of everything but the value of nothing would you agree and how hard -- it to really get a true sense of when these companies stand.
I think that what what you want in this kind of environment it's clear that we're not it's not just the Federal Reserve let's remember.
You also have the ECB committed to unlimited support of Spain and Italy if they sign -- oversight.
You've got Japan now talking about printing money until they get a 2%.
You've got every Central Bank in the world effectively lowering interest rates are expanding their balance -- so everybody is flooding the global market with a quote with liquidity.
In that environment you want assets that can scale their cash flow to the declining value of the currency.
That's equities that's real estate is not fixed income and tragically that's where most investors are putting their money.
Yeah I know what what happens when they take the punch bowl away and and you know what if that happens all of a sudden I know that the Fed says it's gonna signal quite clearly but that's going to be -- -- Well I actually have a feeling that that Ben Bernanke has dusted off the Fed's post wall -- to -- -- People think that we're at an unprecedented policy environment but we're really not.
We -- this deeply indebted after world war two and the Fed took interest rates to zero and kept them there for fourteen.
Every time the ten year treasury popped above two and a half percent they printed money and bought the ten year treasury for fourteen years.
Now the result of that was slowly over time we eroded away we inflated away.
The debt burden left over from -- war two weeks so sort of stole from our bond holders well you know over time.
I think that's exactly what we're planning now so how I don't think we go ahead no finish finish it felt.
Well here's here's the important reason why they did it more -- and why they have to do it now.
The CBO says that if they raise interest rates to three and a half percent by 2017.
It -- a trillion dollars to the annual deficit.
Not ask yourself do you really think congress and the president can agree on yet another trillion dollars in cuts just did offset rising interest costs.
Bring to a certain extent the Fed has been painted into a corner.
Yeah -- at a time I mean literally in ten seconds which sectors do you like daily beacon a jump in -- take advantage of the market.
We like banking here because the real estate markets improving that -- -- free capital for more stock buybacks and dividend increases.
All right very good Michael Jones of the -- riverfront investment group Michael thank you so much we appreciate it.
Thank you -- time on.
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