Quail Ridge Asset's Sylvestri to Moneynews: Fed Won't Taper Soon, Wants Low Rates

Thursday, 13 Jun 2013 07:05 AM

By Glenn J. Kalinoski

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Ron Sylvestri, founder and president of Quail Ridge Asset Management, doesn’t expect the Federal Reserve to begin tapering its program of quantitative easing any time soon.

"They don’t want to [change] the game that has been going on for the last couple of years," Sylvestri told Newsmax TV in an exclusive interview. "They probably are not going to [taper] and try to get rates back higher. I think for now they are going to stay low."

Fed policymakers meeting June 18-19 in Washington will consider how much changes in inflation and the labor market will influence the pace of their $85 billion in monthly asset purchases, according to Bloomberg News.

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Editor's Note: A full, unedited version of this interview is available exclusively to Financial Braintrust Alliance subscribers. Visit www.fbtalliance.com for more information and to sign up.

James Bullard, president of the St. Louis Fed, has said inflation below the central bank’s 2 percent target may warrant prolonging bond buying.

Policy makers expanded their first round of quantitative easing in March 2009 by announcing they would buy Treasurys in addition to mortgage-backed securities and debt of government-sponsored enterprises as the inflation measure cooled to 1.4 percent on its way to reaching 1.2 percent that July.

In November 2010, the Federal Open Market Committee announced a second round of Treasury security purchases, or QE2, totaling $600 billion as price increases again slowed.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

"Anytime you hear that the QE4, QE5 or QE6 isn't going to happen," he said. "You see the equity markets sell off and … rates go back up," he said.

"This is a rate-driven equity market from the way I see it. If you could tell me that rates are going to be like this for the next two to three years, if not lower … what does that mean? Borrow, lever up with real estate and go long equities is really to me what it means."

Fed stimulus and better-than-forecast earnings pushed the bull market in U.S. equities into a fifth year and moved the Standard & Poor's 500 Index up 139 percent from a 12-year low in 2009.

The gauge has dropped 3 percent from its record high on May 21, the day before Fed Chairman Ben Bernanke suggested the central bank could curtail its bond purchases, known as quantitative easing, if the economy improved in a “real and sustainable way.”

"I was out in L.A. a few weeks ago and I have a real estate client that is based out there and we sat down after a day of marketing and chatted with them a little bit," he said.

"I got talking to the guys and one of the principals over there, he thinks we're in a Japan situation where rates could remain like this for five or 10 years."

Editor’s Note: Put the World’s Top Financial Minds to Work for You


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