Today I’m posting from Hong Kong. I’ll keep this one short and to the point.
Lately, we’ve been talking about the Federal Reserve. We mentioned how the group is structured, and what their primary responsibility is, as well as their inherent similarities to a bank. You might be asking, however, just why this information is useful to an investor. The reason is simple. It’s because, eight times a year, the Federal Reserve holds a meeting that is the primary motive force in determining financial policy, and thus the movements of the market.
Federal Open Market Commission
The Federal Open Market Commission holds their meeting as we said, eight times a year for the purpose of decided whether to increase or lower the federal funds rate. This isn’t an arbitrary decision though; they are greatly influenced by the market forces. Of course, it’s in their long term best interest to set rates that reflect the reality of the market, and this is exactly why it’s useful to pay attention.
The Federal Reserve has at their disposal a colossal amount of information relating to the market; far more than the average investor has at his or her disposal. While they don’t necessarily share this information itself, the way that they react to it can give one a really good idea of what’s going on behind the scenes and what is about to happen in the near future.
Increase Economic Growth
For example, if the Federal Reserve is trying to increase economic growth, it will reduce the overall funds rate, which may be a sign of an impending downturn that they’re trying to forestall. Likewise, if they need to stabilize too-rapid growth, they’ll increase the rate. In that instance, it might be a good time to put an eye towards selling as growth begins to level off.
Whatever the case, the Federal Reserve is something that is very much worth paying attention to for any serious investor. It’s not exactly necessary to understand each and every little detail of how they operate, but it will likely be of immense help to you if you can at least learn to monitor their policy decisions and know what those decisions predict for the movement of the market at large. It’s like having a team of committed professional analysts at your disposal, if you only know where to look!
As I’ll be away in Hong Kong all this week, I’ll do my best to post next weeks article on time. Bear with me as I might still be in holiday mode. 
Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 – 2008
{ 6 comments… read them below or add one }
Hi Sean,
Have a fantastic holiday and thank you for all your valuable Information.
Regards from
Elisabeth & Kaye
Thanks for the post Bullhunter, it is good to see the rate’s come down so that it ease”s the pressure and stimulates the economy again. Enjoy your Holiday good luck to all the family.
Hi Sean, how and when can we find out about the 8 different reports throughout the year. Is there a website we can read the report?
Cheers Dave
Hi Sean
Very good reading, thank you. I am looking for books to sell on my new site.
Regards
Terese
Hi Sean,
I love that you can be on holidays in Hong Kong and still write a blog post for us to read. It really is; have laptop, will travel.
It’s really interesting what you say about the Federal Reserve and how they increase or decrease the federal funds rate depending on what they need the market to do. So, what happened with the Global Financial Crisis?
Did too many things go wrong at one time for them to take care of it? Because they didn’t really keep the economy healthy then.
Jazz
The Federal Reserve become richer because of the sub prime mortgage crisis.
The US Government now owe them more money.