Happy Talk of the Fed – Can We Say Unreliable?
The Federal Open Market Committee (FOMC), an arm of the Federal Reserve System, likes to think itself as the Holy Scripture of investor’s decision making. When we look back over the last five years we should be able to tell just by deciphering decisions that were made how successful Fed forecasts and policies have been. Would that be a fair assessment to do? From what they forecast and how they turned out would be a fair look into their legitimacy I believe.
There are a grand total of 12 policies in five years that has amounted to confusion and chaos; then missing five forecasts in a row is not only disturbing but incompetent! What this bit of chicanery amounts to is no forecasting ability at all. It is an attempt to put smiles on long faces, happy talk if you will that amounts to none other than made up stories to make the economy look good. All monetary policy and asset valuations looks up-close to be just an unprecedented trial and error exercise from suits with academic pedigrees twisting market news with the official government line with gobble gook jargon.
Purpose of Fed
The true purpose of the Fed is to provide enough information to evaporate uncertainty in the markets. What has happened today is the Fed, with its poor insight and communication skills, simply replaces one variation of uncertainty with another! What has happened is investors, instead of focusing on what the markets will do, wind up wondering what the Fed will do! Not a good scenario for an investment play.
Investors Still Prefer to Wait & See
Looking at the Fed’s forecasting abilities or lack of, with such erratic policy shifts, investors are today starting to ignore Fed policy and focus on trends that are fundamental to the market that will be in vogue for the next three to five year investment cycle.
The constant upheavals in the Middle East, a certainty that China will continue to interfere with her neighbors in the Western Pacific that will lead to United States involvement is almost a given. This International stew suggests defense stocks, energy stocks, gold, that have been beaten down for the past several months will rebound with a vengeance in the next several years. The reason being inflation will kick in with gusto driving investors to safe havens like the above mentioned stocks. I believe the time has come to turn off the distractions from the Fed, forget about their lame policies, and focus on the fundamentals that got you where you wanted to go in the first place.