On the heels of the Fed decision, today 40-year veteran, Robert Fitzwilson, put together another extraordinary piece. Fitzwilson, who is founder of The Portola Group, discussed what the Fed and central planners are facing and how the Fed will buy time and dump its balance sheet onto an unsuspecting public.
Below is Fitzwilson’s exclusive piece for KWN:
Fitzwilson: “It is popular to claim that there is no exit strategy for the U.S. Federal Reserve and Chairman Bernanke. But in reality it is always a long shot to assume that the Fed is out of options.
We agree with those who suggest a reaffirmation of the criteria for triggering “tapering” to begin. The criteria will tie the action and the magnitude of the tapering to employment, general economic conditions, interest rates and inflation. That said, we would not be surprised to see another announcement about a perfectly plausible path to an exit for the Fed….
“Since the 2008 meltdown, the Fed purchased many financial instruments including mortgage-backed securities to arrive at the current $4 trillion balance sheet. It seems to us that the cornerstone of an exit strategy would be to securitize the mortgage-backed securities, and sell those back into the retirement and endowment funds.