Friday morning, October 5, the Vice Chairman of the Federal Reserve Board (Donald Kohn) was quoted as saying “a one half point rate cut may be enough.”
That headline sent the bond market into a tailspin. But wait, here’s the entire quote:
“But pending further evidence, a 50 basis point easing was not an unreasonable first approximation of what might be required to keep the economy on a sustainable growth path. It would be better to respond too much or too rapidly to the turmoil in financial markets rather than acting too little or too slowly.” Kohn said.
“it would be better to respond too much or too rapidly…”
Why is it Wall Street traders, the media, CNBC (and anyone else) latch on to half a story? It’s the same as saying the Yankees lost on Friday night because Joba Chamberlain was bothered by the gnats in the eighth inning. Has the media overlooked the fact the Yankees only managed three hits on Friday?
The truth is the “market” hates indecision and uncertainty. But that’s what we’ve got! Look, no one knows what the Fed will do next…not even the Fed!
The moral of this story is not to rely on the media for your investment advice. The unemotional point and figure charts only track what’s in demand and what’s in supply. This gives us an extremely accurate picture of where our money should be invested today.