While I usually applaud the Fed actions with one of my hands my other hand is examining the holes that Bernanke shooting made in my hat. While last year was incredibly profitable for my portfolio this year I’m up by 1% to 3%, almost flat. Each time Feds step in with unexpected rate cut I’m losing a bunch on my shorts.
I think the smart cowboy is the one who hides when he knows that his opponent will run out of bullets first. I think Feds have only 4 bullets left – they won’t drop the rates below 2% before the global recession starts, if ever. Besides shooting bullets they are throwing knives and stones (like saving Bear today), when they run out of stones they’ll probably fart something toxic 🙂
Anyway, I want them to finish their game before I step in. My plan is to increase my cash position to 50% and keep it like that until the Fed Funds rate is set at 2.25%