The Fed ” Twist “

September 28-2011

Just when I thought we were all set till November…..The Fed has changed the game by announcing it will be an ongoing buyer of  long term Treasuries to decrease its reliance on short term borrowing.

This action will reduce yields on long term Treasuries ( a big new buyer ) and reduce prices on short term Treasuries because a large  buyer will not  be buying.

Our portfolio has $453,744 of what the Treasury won’t be buying. That undercuts our goal of making 3% plus in dividends and interest  and making a ” safe harbor profit ” of another 4.5% from May / November.

I’m not about to fight the Fed, so I am selling out entire positions in BND, BSV, LQD,BIV, VCSH and VCIT. This will result in a realized  loss of $ 1,994 which can be added to the $15,364 in losses we have already taken. Thus, we are down $ $17,058 realized from May 31 ..offest by interest and dividends of about $12,000.

Not bad when you consider we took $116,000 profits off the table May 28 and the S&P 500 is down $134,890 since May 31 versus our  approximately $5,000 loss.

But ” not bad ” doesn’t put food on the table and as of right now with 30 days to go till November we would have been $5,000
better off if we had done nothing with our $1 million on May 31

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