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:
identify some of the funding questions surrounding Bear Stearns,
Countrywide, and some of the commercial-paper programs. There is some
strain, but so far it looks as though nothing is really imminent in those areas. Now, could that change quickly? Absolutely.”
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 www.MarkStCyr.com
