Tony,
Y2K. The Asian financial crisis. One was real, one was not. Greenspan responded to both. Maybe you were prescient, and could predetermine which was real. Being a Monday morning quarterback. In those cases Greenspan responded with caution, and you are criticizing him for that.
The job of the FOMC is to be prescient, and at the same time maintain the confidence of the financial community. If they were to change interest rates every month, on every bit of economic evidence, the folks that invest in equities would have no faith at all. PE's would fall, interest rates would go up. We are investing in companies, but we are also investing in a rational, steady, thoughtful monetary policy.
Do I think the FOMC is behind the curve, yes. Is it better for them to be behind the curve than over-reacting to shadows in the night, yes. As investors we put our faith in a lot of different folks (CEO's, the FOMC), that may not always be right. But if you assume they don't have your best interests in mind, you should do something else with your money.
You have to decide. You say the Y2K thing was an over-reaction, but what's up today is an under-reaction. You are doing a lot of second guessing for a guy that is "out of his field". I'm tempted to do the same.
This is a really hard time in the markets, the hardest I've seen in my life. But I don't think it's time to throw out the stability and independence that is represented by the FOMC. Their actions will be proved right or wrong, but it will be years before we know if they blew it or not.
John |
