Listen to the Fed

Futures were up today on the news that rates would stay low for well into 2010 if not longer. This is great for consumers as low rates spur more borrowing and essentially spending. Do not be quick to rush into the market thinking it's going to continue to rally on low rate news.

Why are rates going to remain low? Simply because the economy is going to slowly come around. I would like to emphasize the word slowly. We need low rates because the economy is still in the gutter. Consumers continue to borrow less and less. Retailers and shipping companies are optimistic about the holidays. Why? If unemployment is rising and consumers are borrowing less and less, why do we think the holidays will turn the economy around?

Listen to the Fed. The economic recovery is going to be weak and erratic according to Fed officials. Why are we getting optimistic about the holidays and low interest rates? Sure low interest rates should spur a quicker than normal recovery, but look at the deeper meaning behind this. The economy remains in terrible condition. Be hesitant to rush into what the media is telling you. Cash money is not always made by outperforming the market but by limiting losses in tough times. Get a few staples or high yielding companies that will give you some type of hedge. The economy is not going to be booming for awhile. Economists expect unemployment to subside halfway through 2010. This is not a normal recession. Plan accordingly.