Virtually everything going on in markets right now (or so it would seem) has to do with what central banks are doing (or are projected to do). It certainly is not true in reality – the things happening today that will ultimately determine investment outcomes in years to come will have far less to do with the cost of capital and far more to do with human action – but in the day-to-day volatility of market price levels, I have no choice but to pretend. Well, “pretend” is not actually the right word – it is more an acknowledgment that the world we are living in gives a lot – and I mean a lot – of attention to the Fed in one’s outlook on financial asset pricing and economic health.
The current obsession with the Fed (as in the immediate 2022 and soon-to-be 2023 period) revolves around inflation. We have had a cult-like obsession with the Fed for over 25 years, so it is not inflation that created the Fed’s place in our hearts and our wallets. But right now, inflation is the cause du jour – the rationalization for 24/7 coverage of the Fed, and certainly the Fed’s stated rationale of heavy activity in financial markets.
Much of this is with good reason. Much of it is so misguided that I don’t really believe I am hearing what I hear some days from people I know [used to?] know better. But all the talk about the Fed right now is tied up with all the talk about inflation, and therefore a re-visit on the inflation subject is in order.
Jump on into the Dividend Cafe, and may our investigation of the state of the nation when it comes to inflation bring some revelation about the Fed’s imagination in matters of monetary administration as we pursue our goal of wealth creation.
Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com