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Two Ways To Play: Holiday Mortgage Shopping Spree


Strengthen your portfolio in good times and bad.

It's the holiday season and the Federal Reserve is doing plenty of shopping. Bloomberg reports the central bank bought about $3 billion worth of Fannie Mae (FNM), Freddie Mac (FRE) and Federal Home Loan Bank debt in an effort to reduce mortgage costs.

On its website, the bank said it bought bonds that mature between December 2012 and November 2017. The purchase was "financed through the creation of additional bank reserves." This is the second transaction of the Fed's new $100 billion program. Last week it made a similar acquisition of $5.9 billion in notes marking the first investment in agency debt in almost 30 years.

This is in contrast to the activities of other central banks. Fed data shows holdings of agency and mortgage debt by foreign central banks have dropped by $125 billion from a July record to $859 billion because of this year's market turmoil.

For context, see Professor Lance Lewis' column, Minyan Mailbag: No Tarnish for Gold.

From the Bull Pen: Bulls can consider the gold ETF (GLD). One can consider setting an initial position here with a sell stop below $76.

From the Bear Cave: As Professor Lewis says, the Fed has only two options: default or debase. Bears can consider the dollar bearish fund (UDN). A sell stop can be set in the $24-25 range.
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No positions in stocks mentioned.

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