Thursday, 17 September 2015

Fed day - Only worry about things you can change.

Okokokokok I’ll play.

It’s a bit like going along to a sports event that you have no interest in just because all your friends are going. Or a dinner party with the people that you really can’t refuse again as you’ve run out of excuses. Or the christening party of a work colleague’s child.

Today sees an event that I have no interest in, yet all my friends can’t stop talking about it and want me to join in. As with soccer talk, by the way I am rubbish at soccer talk, the greater the detail of knowledge expressed by a follower, the greater the self-perceived standing of that person. But knowing the maiden name of the goalkeeper’s maternal grandmother is not going to change the outcome of the game. And, I am afraid, knowing anything about the thought process, economic inputs, outputs, shoe size, dietary requirements or star signs of the board of the Federal Reserve will make absolutely no difference to the outcome of today's meeting.

We are all spectators watching it on TV and whilst we may think that our jeering and shouting at the players on the screen will make a difference it will not. If we all switched off and went to the pub with our friends there will still be an outcome without our input. As my wife told me, "only worry abut things you can change”. I cannot change the outcome of the Fed’s decision.

So what is all the fuss about then? Well the function we can change is not the decision, but how we maximise our gains and minimise our losses against the uncontrollable outcomes of the decision. The options  are simple -

1. Take a view on the Fed, mortgage the kids and load the boat.
2. Reduce your risk to zero and go to the pub.
3. Do nothing but pre-write two paragraphs for your next report
       i) Lost money due to unforeseen and blatantly stupid Fed action.
       ii) Made money due to exceptional skill in reading the Fed decision based on knowledge of board members shoe sizes and grandmother’s maiden names.

For some there is of course option 4. Not to personally give a damn as you have no positions or skin in the game, but go on and on and on about your opinion in the hope that should you be right someone will pay you for your opinion next time.

Human nature hates uncertainty, markets pretend they hate uncertainty but actually make all their money from it, and journalists just love it.

(By the way, if you do happen to be a Fed Board member reading this, just email me direct and I’ll explain why my stalking of your daily routines and habits should mean you do what I think you should)

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