Fed Chair Janet Yellen is willing to make you rich.
It sounds a bit crazy, I know.
But please hear me out.
Because if you do, the next few years are shaping up to be spectacular.
It’s Never Different This Time
First, you have to forget about everything you’re reading about the Fed, everything the members say, and all the “analysis” of the comments.
It’s all far simpler than most make it out to be and the results are easily predictable.
Let me explain.
You saw last week when Yellen announced the Federal Reserve will not be raising short-term interest rates.
The announcement was no surprise to any readers here.
After all, it was the 52nd time out of the last 53 Fed meetings in which rates were unmoved (note: there are eight meetings a year when rates are set).
That’s nearly seven years of zero or near zero short-term interest rates.
Has much has changed over that time?
Sure, a lot has changed.
Then again, a lot hasn’t changed.
Understanding what will and won’t change will be absolutely essential to making money from your investments in the next few years.
First, let’s look at the lack of changes.
Seeds That Never Grow
The Fed is clearly set on keeping interest rates low.
The stated goal of this policy is to stimulate job growth, foster economic growth, and keep incomes rising.
The actual goal is to maintain the status quo.
I realize that sounds a bit like a conspiracy theory, but it’s not.
Japan has tried the same thing with no results.
The only difference is Japan has been doing it for far longer.
The Japanese mega-bubble blew up at the end of the 1980s.
The central bank of Japan’s response was to slash interest rates.
Japan cut rates down to near zero in the in the 80s and they haven’t budged since.
Nearly 30 years later all Japan has to show for it is about three decades of annual GDP growth around 1% and the Japanese Prime Minister is still talking about seeing “seeds of growth.”
Give me a break.
Basically, Japan has proven for nearly three decades that zero or near zero short-term interest rates do not work stimulate job growth, foster economic growth, or set incomes rising.
The Fed is doing the exact same thing.
If the Fed really wanted to create some change, they would try something different.
It’s not and, for the foreseeable future, it won’t either.
That’s where the second part comes in...real changes.
Winners And Losers
A lot of politicians talk about a growing pie to keep everyone happy.
It’s a cliched metaphor for sure.
But it’s also simple.
In this case, the Fed’s policies are going to prevent the pie from growing.
In fact, after the Fed announcement, it released its economic forecast and it wasn’t good.
The Fed revised its official expected GDP growth forecast down from 2.0% for the next year to 1.8%.
Since these forecasts consistently over optimistic, the actual results should be even lower.
As a result, the winners in the economy and investing will be those who get a bigger piece of the proverbial pie.
Everyone else....well, good luck.
In the end, it’s a frustrating time that not everyone is going to win in the next few years.
But it’s also an opportunistic time in that you still can win if you see what’s going on and invest accordingly.
When we get back together this week I’ll go over how to spot the companies getting a steadily bigger piece of the pie, how to spot them early, and the next piece of the pie ripe for getting gobbled up.