As many of you know I’m in the process of moving to my new residence. With all the wonders that entails (yes, sarcasm is present there) I thought a post I wrote earlier this year would be fitting for it garnered a lot of attention with so many lining up to tell me I should just “Move on! Well, I have. It also seems – so has the Fed. Although quite possibly breaking the “lease” everyone thought was iron clad. Moving words, moving statements, moving markets. One has to wonder: “What’s the next move? Or, better yet: ” Who’s move is it?”
Right For All The Wrong Reasons
(Original post January 2013)
One can’t help but look at the financial markets close as of Friday and not shake their head in bewilderment. For anyone (including myself) that has expressed caution since the beginning of this historic rise we are left scratching our heads. The mantra of “Don’t fight the Fed” has just been spot on. However, that saying was used far before, and for other reasons than to explain what we are currently witnessing today.
Some only read the headlines trying to extrapolate any discernible information for what we see taking place. Others just use a “going with the flow” type strategy because they don’t know what else to do. It can work for a time however, it can set oneself up to do exactly the wrong things at the wrong times.
There’s nothing wrong with being wrong if; your decision-making process was based on sound principles. You can adjust your strategies and tactics based on execution. Yes, there are also times you must just take a “guess.” However, it’s in the knowing of which you’re doing that’s crucial.
Currently across the media there’s the clarion call that the Fed is completely in control. That presumably around some table sits a gathering of people far smarter than any other mere mortals pushing and pulling levers with effortless efficiency controlling the monetary system like an athlete in top form.
People will point to the markets recovery as proof of their gold medal performance. From the outside it’s sure hard to argue with that logic. However, something transpired this week that for anyone that takes business or financial matters seriously; we finally have a glimpse into the window that so far has been sealed shut.
We had in many news outlets writings on, or reporting of, the FOMC releasing the actual meeting transcripts from 2007. Here’s a sample in which you may have seen reported elsewhere across the web:
A conversation as per the recently released FOMC transcripts from 2007. Emphasis added:
Aug. 7, Mr. Fisher: “No amount of rewriting of history will exonerate us if we are not prepared for the more-dire scenarios that were presented by the staff. I would ask that we do some scenario preparation in terms of, should we encounter increased financial-market turbulence, what actions we might take to deal with it.”
Aug. 7, Mr. Bernanke: “I think the odds are that the market will stabilize. Most credits are pretty strong except for parts of the mortgage market.”
So, many of you might be saying, “Yes, and so what. Doesn’t change anything in my mind or the markets.” To which many would agree. However, that’s exactly what you don’t want to think.
When you’re truly serious about business and financial decision-making with real money and or livelihoods on the line. A headline or excerpt is the last thing you’ll use to formulate any decision or strategy. You need context. How was it said – in reference to what or why. You need to know the whole discourse. Anything less – and you’re just guessing.
As I said earlier that window of critical information that many like myself have been clamoring for as to get some glimpse into what is going on behind the curtain was released. The Federal Reserve made public in full detail their meeting from August 2007 in PDF format. You can read it here.
With the beauty of hindsight this document is a must read for anyone serious about the markets and or business. This is a glimpse into the real conversations, and thinking process of the key players that currently “control” the financial markets in a way that is unprecedented.
You need not have sat on, or answered directly to a board. That’s irrelevant. These minutes read as they should. They are laid out where you can read them as if you’re a fly on the wall listening in. They’re not a quick study – nor should they be. There are over 100 pages. Yet, I believe as I’ve said before they are imperative if you wish to get some context as to what is going on within the hallowed halls when the train gave its first signs of coming off the tracks. And, how the key decision makers viewed what was happening and how to deal with it.
I believe for a great many of us it will provide some clarity to what we felt all along.
Not only were we right for being so cautious even as the markets continue to rise. But, the higher the markets rise; the more justification we have for being even more cautious.
Because, to what can be deciphered when one reads what was going on within the minds and how they perceived what was happening. It’s this very same cast of characters that are supposedly still in “control” of what we are currently witnessing.
Maybe we aren’t worried enough.
© 2013 Mark St.Cyr