Should I Buy Now, Janet?

Sinking

This is a Friday in August, when markets are usually asleep. All the bankers and traders are on their yachts bobbing about on the Mediterranean. Alas, the retsina found a way to get to stocks this week.

Today alone: Dow down 530, Nazz Comp 171, the 500 as you would expect.

Where is Janet? Should we buy assets now, as she keeps telling us? The question is, is she buying assets? And is that QE4 we can hear cranking up?

The above picture was taken off Mykonos yesterday. Owning a superyacht? Awesome. August on the Aegean? Amazing. Running aground on a Greek reef? Some kind of irony, eh?

Buy Assets?

In a speech almost exactly one year ago, Janet Yellen expounded on the theme of low and middle-income families should indulge in a little “asset-building.”

She believed in this because her – and her predecessors’ – entire strategy relies on asset-price inflation. She wants the prices of all kinds of stuff higher. She courts inflation. For the good of us all, you see.

To make this work, she has two tools. The Federal Reserve maintains the very short-term interest rates that it alone controls, low. This minimizes the cost of money, borrowing. It also prints money, which is variously disguised as expanding the balance sheet, or, more commonly, “Quantitative Easing”. That means it is creating an enormous pool of funds that banks can access to lend.

There is a third leg of the stool which is much less publicized. The Fed is now the marginal buyer of all kinds of financial assets. They buy stocks. They buy REITS. They have been for ages now THE buyer of bonds.

This might seem esoteric and far removed from our lives, but it is not. The problem for Janet is that markets are how assets are bought and sold. Houses, stocks, bonds, art, wine…everything. And the thing about markets is that eventually, despite whatever manipulation you can manage, they re-assert their dominance. The real price will out, so to speak.

Today, DJIA down 358. Other indexes likewise, all now unchanged or down on the year.

Janet. Should I buy now?

You Will Know

You will know when the time is right, says one person.

You’ll get a feeling claims another.

Someone else spouts that The right course of action will become clear.

These are all responses to a question, viz:

I’d like your advice on when to….{fill in your uncertainty.} I’m not sure whether or when I should… {do a specific thing/take a definitive course of action.}

Seeking advice can be fraught. What happens is that you present your dilemma/range of choices to someone, and they assess the factors. The problem is that presenting all of the inputs to a decision isn’t easy, and neither is communicating their relative importance to you. The bigger the fork in the road (awful cliche alert) the less likely you are to receive a useful response.

Which is why conversations that circle around this territory often end with the above bon mots. What people are really saying is:

Look, I don’t know what’s right for you. Trust your instincts.

My instincts? That’s why I came to you, because I don’t trust my instincts.

Some things you just have to do alone.

Precision, Imprecision

Ansett B-727

The dream was clear from about age 8. I was becoming an airline pilot and my aeroplane of choice was the Boeing 727. The -200 series, please. I would live in Melbourne. Days would be filled with sunny flights around the country. I would be content into old age.

Dreams and goals are odd animals because they are often super specific. Super-specific. Like our minds are digital machines.

Real life is utterly analogue. It is valves and pumps, lags and bumps, derailments and diversions. The number of influences on a life will approach the infinite. The choices we make, the priorities we set and the decisions we make make a wriggly snake out of our arrow-straight dreams.

Being okay with what happens makes for an easier time of it. Arriving somewhere in the general vicinity of your original destination is about as much as we can expect.

This, I have learned.