We see continued purchasing power erosion (Financial Repression). Short-term interest rates are now entering their fourth consecutive year at well below the rate of inflation, as the Federal Reserve has kept short-term rates pegged near 0% since December 2008. Furthermore, the Fed has announced their intention to hold rates near 0% until at least 2013. This means that shorter-term CD and Treasury holdings will continue to suffer meaningful losses in purchasing power. The entire Treasury yield curve is currently below headline inflation of 3.6%, as the Fed's 'operation twist' - purchasing $400 billion of longer-term Treasuries and selling a like amount of shorter-term securities (by June 2012) - contributed to a sharp drop in longer-term yields during the second half of 2011. By keeping interest rates at historically low levels, the Fed is helping to ease the US government's interest rate burden on its huge debt outstanding (14.3 trillion). The chart (financial repression) on the next page shows the 3-month Treasury bill rate and the 10-year Treasury bond yield, after inflation.

David Fuller's view I commend the graph referred to above to all investors.

Financial repression by central banks certainly penalises savers. However, historically low interest rates, and particularly negative real interest rates (below the prevailing rate of CPI inflation) should remain a tailwind for Autonomies which are able to generate earnings growth and, ideally, which also pay an attractive yield. I will continue to like these shares while they trade above their rising 200-day MAs and have not accelerated sufficiently to resemble Type-1 endings, as taught at The Chart Seminar.