Jay Powell’s Remarks Are Total Nonsense!

Jay Powell’s Remarks Are Total Nonsense!
By Federalreserve (powell_jerome_060512_8x10) [Public domain], via Wikimedia Commons

Below are some thoughts regarding the comments made by the Federal Reserve chairman yesterday and how it pertains to investors.

Gerry Frigon, Chief Investment Officer at Taylor Frigon Capital Management said:


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“Regardless of what the of the Federal Reserve Chairman 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.

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Q3 hedge fund letters, conference, scoops etc

This is total nonsense!

The Federal Reserve Chairman 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 Federal Reserve Chairman and the bank have 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 Federal Reserve Chairman 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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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver

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