A Scorekeeper, Not a Player
"The dual mandate of the Federal Reserve is much like charging the National Weather Service to balance the frequency of sunshine versus rainfall." -Anonymous
Will our new chairperson, Janet Yellen, bring about the second coming of the great stock market rally that we've enjoyed, despite our conflicting and complicated feelings? How can it be that the market is jubilant? Don't we have to pay back the debt someday? And isn't this economy, at best, lumbering along slowly?
So you would believe if you make that fatal mistake--listening to the media--and I suggest you stop. The truth today is, as it has been, that the media is here to sell their wares and scare you, not to deliver the boring truth that over a long-term horizon, our stock investments outperform others. And furthermore, some investments do better than others, and at different times, which I cannot predict. That's the bad news.
The good news is that no one can predict it. And the further good news is that Janet Yellen, as much as the experts evangelize her, is a scorekeeper not a player. She is a referee and not a quarterback. We give her praise, and tell great stories about the powers of the Fed, and cause great alarm among each other because we do not, despite our best efforts, understand all the effects of all the actions she (and other referees, including the President and Congress) takes. We want to make sense of it.
We need an answer. We look at the market and the economy, we look at our portfolios and our investments and they are each so complicated! We often want a simple answer that helps us keep our balance and then go back to what means the most to us.
The only players on the field are the ones who build wealth, and these are entities that will either pay you a fixed return (bonds) or they will enable you to invest along side their owners (stocks). And if you, like I, trust those who put their money where their mouths are, then you like the companies that pay dividends a little better than those who do not.
So, what will Janet Yellen do next? What will interest rates do next? For these questions, ask the television commentator. For your investment portfolio, and what this means for you, ask instead, "how much money do I have in the best long-term investment?" Consider asking yourself, and your advisor, "should I have more?"