Rates Move Higher as FOMC Excitement Subsides

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After yesterdays FOMC announcement it became clear that it is unlikely the FED will move rates higher anytime soon.  One has to remember that the biggest debt instrument holder in the world is the FED and as rates move higher the value of their portfolio moves lower (although contrary to all banks the FED DOES NOT have to ‘mark to market’) and while the FED has special rules it limits their flexibility in monetary policy if rates move higher quickly.

Interest rates have continued to move a bit higher today after shallow dips earlier in the week.  This kind of surprises us, but it is the way it is.  As long as the move is slow we are not concerned.  The model has moved higher in the last 48 hours and this is typical.  If rates rise slowly our holdings will creep higher–big moves of 20 or 30 basis points could be very painful.

Stocks have moved higher today–a relief rally of sorts I guess.  It seems to us that there is no reason for stocks to get carried away to the upside as earnings of many of the old industry companies are fairly soft (ie food companies).  Additionally as we have mentioned many times the coming recessions in Japan and Europe will at some point in time start to bite our economy.

We sold our Compressco Partners yesterday for a nice ‘flip’ gain, but didn’t unload Vanguard Natural Resources yet–but today we will get rid of it.

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