The Fixation on the Fed

Regardless of what the Chairman of the US Federal Reserve said yesterday, including his "two words", the bigger issue is the extent to which the financial punditry continues to be so enthralled in the analysis of every word that comes out of the Federal Reserve, as if the Fed were the primary harbinger of growth in the economy.

This is total nonsense!  

The Fed is at the center of the world for bankers and financial engineers – so their obsession with monetary policy is understandable. But investors should be careful of confusing the financial world and the banking world with the world of real products and services, where the vast majority of real investment opportunities are to be found. 

The Fed has never invented any product, written a single line of software code, navigated a business through the volatility which it often fosters with its constant manipulation of currencies, and thus is a terrible determinant of a sound investment.  

Simply put, the Fed is better at getting in the way of innovation, which ultimately is what creates economic growth, than it is at fostering innovation.

And this same punditry, which has been calling for a recession every year since the end of the Great Recession of 2008-9, is back at it again.  They are once again stoking fear and consternation in the minds of investors of all stripes (individual and institutional) with their suggestions that the strong economy is likely headed for a downturn based on higher interest rates, "end of stimulus," Brexit, Italy's budget woes, and on and on!

This gets to the heart of why we don't "do the market"!  Okay, realistically, we have no choice but to occasionally do so when we want to buy or sell a company, but, truly, the best advice is to ignore these market fluctuations, comments from the Fed, comments from "Economists" (who rarely actually recognize the important trends in innovation), financial media "experts" (usually "traders") and pay attention to the businesses in which one is invested.  

We have long subscribed to the notion that we will own our businesses through multiple market and economic cycles as those businesses deliver innovation and creativity to their customers/clients and value to us as shareholders.  This is the way we believe we can get the best returns on our investment.

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