http://www.profitableinvestingtips.com/bond-investing/end-of-bond-purchases-drives-stocks-down End of Bond Purchases Drives Stocks Down The prospect of the end of bond purchases drives stocks down. Speculation continues as to just when the US Federal Reserve will start tapering off its $85 Billion a month purchase of US Treasuries. Recent comments from the Fed indicate that changes in the program could come as soon as next month. As the beginning of the end of bond purchases drives stocks down, bond holders and gold investors assess prospects. The Fed has previously announced that it will reduce the size of its bond purchasing program incrementally as the economy improves. Lower unemployment figures and the lowest trade deficit in four years indicate that changes may come soon. What Will Happen to Interest Rates? As the expected end of bond purchases drives stocks down it will likely drive interest rates up. The underlying purpose of the bond purchase stimulus program has been to drive interest rates down and keep them there. As the Fed gives up the job of soaking up all of the Treasury notes interest rates will rise. Fed chairman Bernanke has stated that the Fed will proceed slowly so as not to stifle the recovery. Another issue that has come to the fore is that of possible deflation of the US economy. During periods of deflation cash is king. Deflation makes you richer if you have money in the bank and poorer if you have extensive debt. Inflation raises the money value of homes and businesses over time and the debt taken on to purchase them becomes less of an issue. The reverse happens in deflation when homes and businesses become cheaper in relation to cash and debt can become overwhelming. If deflation occurs it is possible that you will need to pay a small amount of interest to the bank in return for them keeping an eye on your money. That is to say, deflation could lead to negative interest rates. As the possible end of bond purchases drives stocks down it also raises the possibility of deflation and the specter of negative interest rates.

1. End of Bond Purchases
Drives Stocks Down
By: www.ProfitableInvestingTips.com

2. The prospect of the end of bond
purchases drives stocks down.
Speculation continues as to just
when the US Federal Reserve will
start tapering off its $85 Billion a
month purchase of US Treasuries.
By: http://www.profitableinvestingtips.com/bond-investing/end-of-bond-
purchases-drives-stocks-down

3. Recent comments from the Fed
indicate that changes in the
program could come as soon as
next month. As the beginning of
the end of bond purchases drives
stocks down, bond holders and
gold investors assess prospects.
By: http://www.profitableinvestingtips.com/bond-investing/end-of-bond-
purchases-drives-stocks-down

4. The Fed has previously announced
that it will reduce the size of its
bond purchasing program
incrementally as the economy
improves.
By: http://www.profitableinvestingtips.com/bond-investing/end-of-bond-
purchases-drives-stocks-down

5. Lower unemployment figures and
the lowest trade deficit in four
years indicate that changes may
come soon.
By: http://www.profitableinvestingtips.com/bond-investing/end-of-bond-
purchases-drives-stocks-down

6. What Will Happen to Interest
Rates?
By: http://www.profitableinvestingtips.com/bond-investing/end-of-bond-
purchases-drives-stocks-down

7. As the expected end of bond
purchases drives stocks down it
will likely drive interest rates up.
The underlying purpose of the
bond purchase stimulus program
has been to drive interest rates
down and keep them there.
By: http://www.profitableinvestingtips.com/bond-investing/end-of-bond-
purchases-drives-stocks-down

8. As the Fed gives up the job of
soaking up all of the Treasury
notes interest rates will rise. Fed
chairman Bernanke has stated that
the Fed will proceed slowly so as
not to stifle the recovery.
By: http://www.profitableinvestingtips.com/bond-investing/end-of-bond-
purchases-drives-stocks-down

9. Another issue that has come to the
fore is that of possible deflation of
the US economy. During periods of
deflation cash is king.
By: http://www.profitableinvestingtips.com/bond-investing/end-of-bond-
purchases-drives-stocks-down

10. Deflation makes you richer if you
have money in the bank and
poorer if you have extensive debt.
Inflation raises the money value of
homes and businesses over time
and the debt taken on to purchase
them becomes less of an issue.
By: http://www.profitableinvestingtips.com/bond-investing/end-of-bond-
purchases-drives-stocks-down

11. The reverse happens in deflation
when homes and businesses
become cheaper in relation to cash
and debt can become
overwhelming. If deflation occurs
it is possible that you will need to
pay a small amount of interest to
the bank in return for them
keeping an eye on your money.
By: http://www.profitableinvestingtips.com/bond-investing/end-of-bond-
purchases-drives-stocks-down

12. That is to say, deflation could lead
to negative interest rates. As the
possible end of bond purchases
drives stocks down it also raises
the possibility of deflation and the
specter of negative interest rates.
By: http://www.profitableinvestingtips.com/bond-investing/end-of-bond-
purchases-drives-stocks-down

13. Gold Will Become Less
Attractive
By: http://www.profitableinvestingtips.com/bond-investing/end-of-bond-
purchases-drives-stocks-down

14. The Federal Reserve and the nation
are fortunate that the world expert
on the root causes of the Great
Depression took the helm of the
Federal Reserve during the worst
financial crisis in three quarters of
a century.
By: http://www.profitableinvestingtips.com/bond-investing/end-of-bond-
purchases-drives-stocks-down

15. The take home lesson from
fundamental analysis of the early
1930’s is that you need to stimulate
the economy at times of economic
contraction or risk having things
get worse.
By: http://www.profitableinvestingtips.com/bond-investing/end-of-bond-
purchases-drives-stocks-down

16. As luck would have it Mr.
Bernanke did exactly that and
helped the nation avoid a second
Great Depression. The stimulus
bond program is part of the rescue
package for the US economy.
By: http://www.profitableinvestingtips.com/bond-investing/end-of-bond-
purchases-drives-stocks-down

17. However, financial stimulus
programs need to come to an end
or they threaten to bankrupt the
US government by loading on ever-
increasing debt.
By: http://www.profitableinvestingtips.com/bond-investing/end-of-bond-
purchases-drives-stocks-down

18. As the end of bond purchases
drives stocks down it will also lead
to a further fall in gold prices. One
is that gold tends to fall when
interest rates go up, which will
likely happen as the stimulus
programs ends.
By: http://www.profitableinvestingtips.com/bond-investing/end-of-bond-
purchases-drives-stocks-down

19. Also, by reducing government
spending the nation will more
likely come to grips with its debt
burden which will lead to fewer
folks squirreling away gold as
protection against financial
collapse.
By: http://www.profitableinvestingtips.com/bond-investing/end-of-bond-
purchases-drives-stocks-down

20. If investing in gold interests
you, you may want to wait until the
fall is over and there is a bounce.
By: http://www.profitableinvestingtips.com/bond-investing/end-of-bond-
purchases-drives-stocks-down