TRUCKEE, Calif. – A couple of weeks ago, I wrote about the market’s expectations for the September FOMC meeting. At that time many prognosticators were expecting another round of quantitative easing, or QE3. What Bernanke delivered instead was “Operation Twist.” Operation Twist is not a clever moniker for a top secret U.S. government covert operation, nor is it a new version of a dance made popular by Chubby Checker.Operation Twist is a plan by the Bernanke Fed to lower long-term interest rates. With the short-term rates already near zero, they can’t be lowered much further. The Fed is going to attempt to twist the yield curve by selling short-term Treasurys and buying longer dated bonds. Generally when you buy something, it causes the price to rise. If the price of a bond rises it means that the yield falls. So, if the Fed sells short-term and buys long-term bonds, it should raise the short-term rates and lower long-term rates. One key difference between twist and QE is that with QE, the Fed printed the money to retire bonds; this time around they’ll be selling bonds to raise the money to buy the longer-dated issues.The market reacted to the Operation Twist announcement by selling off, but at this point in the game, when most forecasters are calling for slow growth and continued high unemployment, any type of stimulus can’t hurt.Investors should be watching out for inflation; some members of the Federal Reserve believe that it would be OK to have some tolerable level of inflation for the short term if it brought the unemployment rate down. Investors who find Treasurys suitable may want to consider holding or even adding to long-term Treasury exposure and hold some investments that act as an inflation hedge. In the near future, we should be able to expect to get higher yields on short-duration bonds than we are seeing now.Kenneth Roberts, a Truckee-based Registered Investment Advisor, has been in the securities business since 1992, has worked as a branch manager for a major Wall Street firm and is currently a portfolio manager for Fusion Asset Management. Information on his money management service can be found at http://www.fusiontargetretirement.com or by calling 775-675-8065. Past performance does not guarantee future results. Consult your-financial adviser before purchasing any security.