Keeping Your Eye on the Ball

Investors face a fire-hose torrent of information every day.  Determining what’s important and what’s irrelevant is critical.  Projections of doom and gloom are interspersed with promises of fabulous wealth if only we invest in a certain way.  99% of it is useless or even counter-productive, meant to entice the unwary investor to chase after chimeras that are simply not real.

Today’s issue of First Trust’s Monday Morning Outlook:

Honest question: How much time does the Apple Inc. Board of Directors spend debating whether the Federal Reserve will hike rates once or twice more in 2016?  We don’t really know the answer, but we would guess the best answer is zero.

Now, how much time does CNBC spend debating this question, along with potential actions of the Japanese and European Central Bank?  Answer: Way, way too much.

Business news should cover business, not government, but somehow, over the years, people have been led astray and many now think actions by the government are more important than actions of businesses and entrepreneurs.  Nothing could be further from the truth…

So, while the TV debates between day traders rage on, it doesn’t really matter whether the Fed lifts rates in June, or not.  The difference between a 0.5% and 0.75% federal funds rate matters little to corporate America and entrepreneurs.  In fact, higher rates will most likely make money more available, not less.  If the Fed really wanted to tighten policy, it would get rid of all excess reserves, but it won’t.  So, we suspect a symbolic rate hike in June, no matter what the talking heads’ endless debates about the matter suggest.

As investors we want to follow the lead of Boards of Directors, not the lead of what passes for business journalism these days.  No matter what they say, it is the entrepreneurial class that drives economic activity, not the government.

After all, Greenspan, Bernanke and Yellen have never pulled all-nighters drinking Red Bull and writing Apps for the iPhone.  That’s what changes lives, not quarter point rate hikes.

Professional investors have learned the difference between meaningful information that has a real impact on portfolios and simple distractions.  If you are interested in seeing how this process works, contact us.

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