The Federal Open Market Committee, FOMC, which sets monetary policy in the United States, surprised investors Wednesday by signaling that it will keep interest rates low until late 2014. It also set an inflation target of 2%/year. How do these decisions affect you?

As a stock investor, there's good news and there's bad news. The good news is that low interest and inflation rates lead to higher stock valuations, which lead to higher stock prices. The bad news is that the FOMC's position is based upon forecasts of reduced GDP growth. Since stock value depends directly on earnings growth, and earnings growth depends directly upon economic growth, slower economic growth will result in lower stock prices unless corporations can continue to increase earnings despite a weaker economy.

Fortunately, Dr. Bernanke and associates are doing everything they can to stimulate economic growth. A key factor has been and will continue to be to maintain a policy of extremely low interest rates. While this has been beneficial to stock investors, it has hurt investors who are seeking current income. This unintended consequence has given rise to extreme interest in dividend paying stocks. I have no problem with buying dividend paying stocks and we have the best system around for doing that, but it is not the best way to generate substantial income.

The best way to generate substantial income is to sell options. For years and years, I have preached that every investor should learn how to trade options and I'm pleased to see that more and more of our subscribers are attending our One-Day Options Course and learning how to implement the PayDay Portfolio. I have been solicited time and time again, for as much $1,500 a year, to buy newsletters that recommend selling options. Based on what I have seen, I'll stack our PayDay Portfolio against any of them anytime. Sorry for the rant, but making money by selling Covered Calls is such a wonderful way to generate income, I get carried away thinking about it.

The bottom line is that the FOMC's recent policy statement is a double edged sword. It can help you or it can hurt you. So you must learn to deal with it. You can't ignore the FOMC Policy Statement.

Our job, here at VectorVest, is to provide you with all the information, tools, training and techniques you need to make money in the stock market. With this in mind, the VectorVest 7 platform contains a powerful array of tools which can produce stunning investment results when used creatively. One of our most creative employees is Mr. Todd Shaffer, Manager of Research.

On April 1, 2011, Mr. Todd Shaffer illustrated the power of several of these tools in a "Strategy of the Week" presentation called "The VectorVest Triathlon." A week later we announced the VectorVest Triathlon Competition in which subscribers were invited to participate in a sequential application of the VectorVest BackTester, RealTime Derby and Automated Portfolio Manager with the goal of achieving the greatest percent gain in each event. The competition was completed on October 31, 2011 and a complete summary of performance results for each competitor for each event and the overall competition was shown in the VectorVest Triathlon Challenge Results Page. You may access this page by clicking on http://www.vectorvest.com/Triathlon/

A complete summary of the winners and attendant information on awards, performance and Strategies was given in my essay of November 4, 2011. Readers were advised to watch that evening's shocking "Strategy of the Week" presentation, "Triathlon Winners," given by Mr. Raymond Clark. His pithy comments regarding the anemic performance of the Triathlon Strategies during the brutal time period of 05/31/2011 - 10/31/2011 led directly to a challenge to Mr. Shaffer to "find something that worked." Mr. Shaffer complied by producing a BackTester gain of 68.09%, which isn't bad in any kind of market. Nevertheless, we challenged you to beat Mr. Shaffer's results. Here are the three top winners:

FIRST PLACE WINNER: MR. MICHAEL SCOTT, 143.92%.
Here's what Mr. Scott had to say:
To develop the strategy, I pretty much followed the path you used. I have searches which I created and using the Simulator, I ran some QuickSims. (I created long and short timing for the periods). From there I ran several simulations on the ones with the best potential and then ran sorts on them. I did tweak some searches somewhat and re-ran the simulations to come up with the ones I thought worked the best. I did some stops with the simulator but refined them once I plugged everything into VV7 BackTest. The names are "On the Rise" for the bull and "On the Slide" for the bear. This is exciting, I hope it works out. Thank-you for all your time and effort in the contest.

SECOND PLACE WINNER: MR. JASON NEAR, 138.28%.
Upon learning of his success, Mr. Near had this to say:
That's great news, now I'm looking forward to reading the views even more than usual!

I've been a VectorVest member for about a year and a half. I first started developing my own strategies for the Triathlon Contest and I was able to get 3 strategies in the top 15 - and all without the simulator! The process really helped me to better understand how and why certain strategies work at certain times.

The names of my strategies are as follows:
Long Strategy: Fishing with Dynamite
Shorting Strategy: Near's Nose-Divers

THIRD PLACE WINNER: MR. MARCIO PINHEIRO, 98.43%.
Here's what Mr. Pinheiro said:
This is great news. I do not have any name in particular for the back test performed.
Below are key points used in my back test:
* I used a free trial for the AutoTester.
* I started my back test using the top strategies that you identified to be the best for long and short. No other strategy that I also tested could produce better results.
* I tested different stop/loss for the different strategies. I obtained the best results by using ATR (Period: 15, Multiplier: 1.50) for long and 7% Gain, 9% Loss for the Short. The idea was to cash the gain and reduce the loss as quick as possible due to the current market condition.
* I also verified each result with a different timing, but the best result was the Confirmed Call as you identified.
* It was kind of hard to back test all this manually, but I really enjoyed. VV is a great tool!

For a full explanation and performance demonstration of these Strategies, please watch tonight's "Strategy of the Week" presentation, "Winners of the Shaffer's Solution Competition."

One of the first things I do upon opening VV7 each day is to check the Derby. The open of last Monday's market wasn't particularly positive so I was pleasantly surprised to see a bullish strategy, Firework Stocks, at the top of the leader board. It had a huge gain, so I clicked on it to see the stocks in the portfolio.

Sure enough, the big winner was a relatively obscure biotech stock called Inhibitex, INHX. It had gapped up at the open, going from $9.87 to $23.71 per share for a 140% gain. When I looked at its graph, it was like seeing an old friend. It was a former Teeny Bopper.

What, pray tell, is a Teeny Bopper? A Teeny Bopper is a low-priced stock with explosive price appreciation potential. I first wrote about them in my book, "Stocks, Strategies and Common Sense." They are stocks that can double, triple, quadruple, and even go up by a factor of ten, twenty and 100 times in price in just a matter of a few years.

A 5-Yr., Daily Graph of INHX, with Price in the upper portion and Volume in the lower portion, shows that Inhibitex was less than 50 cents a share when it first gave indications of becoming a genuine Teeny Bopper. Its Price hit multi-week highs on tremendous Volume on April 24 and 27, 2009, going from 28 cents to 35 cents; then to 37 cents per share in two days.

I'm not saying this stock was an obvious "buy" back then, but hitting new Price highs on high Volume is an important factor in recognizing a Teeny Bopper. INHX hit new Price highs on June 3, 8 and 9, 2009 on above average Volume and took off again in September 2009. It closed above $1.00 per share on September 10, 2009 and would have been found by our Teeny Bopper search. If you run the Teeny Bopper search as of September 10 or 11, 2009, you will find INHX ranked second from the top. Look at its 5-Yr., Daily Graph again. You'll see that it has the classic pattern of a true Teeny Bopper: it flat-lined for a long time; then hit new high after new high on high volume before exploding in price.

I have written about Teeny Boppers and these chart patterns on numerous occasions and I still marvel at how it found SOHU at $1.70/share on June 28, 2002 and SINA on July 12, 2002 at $1.85 a share during an awful bear market. But it didn't find these stocks only once. It found them over and over again. My essay of June 6, 2008 says that the Teeny Bopper search found NutriSystems 15 times as it went from $2 to above $5 in January 2005.

Teeny Boppers is a great search and I'm hopeful it will inspire you to Nail a Twenty Bagger.

SHAFFER'S SOLUTION COMPETITION.
We are in the final stages of verifying the results of the "Shaffer's Solution" competition. The winners will be announced next week. All I can say at this time is that we have some outstanding results and very interesting strategies to report to you.

As promised in my December 23, 2011 essay, we have "gone live" with our VectorVest 7 Model Portfolios. You may access these portfolios by clicking on the Portfolios tab and track their performance in accordance with the type of subscription you have: VV 7 RealTime users will receive tick-by-tick information throughout the day, users of VV 7 IntraDay will get the same information with a 15-minute delay, and VV 7 End-of-Day users will receive information as of the market's close.

Four Model Portfolios have been created in VV 7 US and one in VV 7 CA. These are:

CHAIRMAN'S CHOICE - 2012. This portfolio will contain mid to large cap stocks that have attracted my attention for one reason or another. Hopefully, they will outperform the market and can be held for extended periods of time. Although the portfolio will go long or short depending upon market conditions, it is not meant to be a trading portfolio. I believe it will be suitable for both Prudent and Aggressive investors.

RIDING THE WAVE - 2012. This portfolio is strictly for Aggressive investors, looking for quick profits. It involves a lot of trading and goes long and short as the market's trend dictates. It will be comprised of stocks taken from the one-day and/or five-day Derby Winners. I cherry-pick these stocks by looking at the best performers with smooth, rising price patterns. I prefer to trade stocks with prices greater than $5.00 per share. (Please note: A Canadian Riding the Wave portfolio has been created in VV 7 CA.)

S&P500 - Stop Asc - 2012. This is a new portfolio which is based upon a trading system described by Mr. Todd Shaffer, Manager of Research, in the December 23, 2011 "Strategy of the Week" presentation called, "Splendid SPRDs Supercharged." You may recall that it produced an 855% gain from 03/21/03 to 12/09/11. We will do our best to manage this portfolio exactly as Mr. Shaffer described. Both Prudent and Aggressive investors should like this portfolio.

YELLOW BRICK ROAD - 2012. The history of this portfolio goes back to a series of essays I wrote in 2008. Originally, it was aimed at Prudent investors and was limited to buying high VST stocks long and selling-short low VST stocks greater than $20.00 per share. More recently, we have used the S&P500/RT search and variations thereof to go long. A variation that I like is one in which the basic S&P500/RT search was modified to return stocks that have trended higher for three days. For example, we ran the search as of last night's close; then Quick Tested the top 50 stocks ranked by RT Asc to 11:45 AM, sorted these results by Percent Price Change and bought the top three gainers. I called the new search S&P500 - Up Up Up and it should be in UniSearch as of tonight.

I'm quite excited about using the Automated Portfolio Manager to demonstrate the Model Portfolios and I encourage everyone to use the Reports and Recent Activity features to track the trades we make in The 2012 Model Portfolios.