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All written content on this site is for informational purposes only. Opinions expressed herein are solely those of Asset Management Group, Inc. Any material presented is believed to be from reliable sources and we make no representations as to its accuracy or completeness. All information and ideas should be discussed in detail with your individual advisor prior to implementation. Links to other sites should not be construed as endorsement of that site's advice and/or products. Although Asset Management Group, Inc. is a subsidiary of Country Club Bank, nothing presented here should be construed as either an offer to buy or sell securities, and does not represent a guarantee by the bank, implied or otherwise, of any financial asset.
Disclaimer

Disclaimer

All written content on this site is for informational purposes only. Opinions expressed herein are solely those of Asset Management Group, Inc. Any material presented is believed to be from reliable sources and we make no representations as to its accuracy or completeness. All information and ideas should be discussed in detail with your individual advisor prior to implementation. Links to other sites should not be construed as endorsement of that site's advice and/or products. Although Asset Management Group, Inc. is a subsidiary of Country Club Bank, nothing presented here should be construed as either an offer to buy or sell securities, and does not represent a guarantee by the bank, implied or otherwise, of any financial asset.

Tuesday, June 17, 2014 The Fed's Flawed Forecasts
by AMG

I think we can all agree that the effectiveness of the Fed's actions during financial crisis starting in 2008 will be debated for many years to come.  One thing we can already agree on, though, is that the Fed (specifically the FOMC) is really terrible at providing forward guidance.  Check out this picture that Barry Ritholtz posted at the Big Picture courtesy of BofA Merrill Lynch:



I think that nicely sums up how the last few years have gone.  Basically, the Fed keeps saying "we're almost there, and rates will have to rise just around the corner."  And then the recovery is weaker than expected.  Wash.  Rinse.  Repeat.

We saw a lot of banks structure bond portfolios in 2009 and 2010 (when the balances were growing like crazy) so that they had a giant block of maturities to reinvest in 2012 when the Fed said rates would be higher.  Oops.  We also saw (and still see) bankers holding giant cash and Fed Funds Sold positions to keep as "dry powder" for the higher rates that are coming soon.  Bigger oops.

So now the Fed is saying that the increases may start in the second half of 2015.  Maybe they will, but the chart above sure disagrees.  So, what do you do?  Our answer is the same - don't try to outsmart the markets.  Decide on a consistent and disciplined investing strategy and stick to it.  The banks that have done that since 2008 have wildly outperformed.  The added income far outweighs the slight (and temporary) advantage to be found if you happen to time the rate change exactly right.

Anyway, I thought it was good food for thought as we wait for the latest from the Fed this week...

Note: All written content on this site is for informational purposes only. Opinions expressed herein are solely those of Asset Management Group, Inc. Any material presented is believed to be from reliable sources and we make no representations as to its accuracy or completeness. All information and ideas should be discussed in detail with your individual advisor prior to implementation. Links to other sites should not be construed as endorsement of that site's advice and/or products. Although Asset Management Group, Inc. is a subsidiary of Country Club Bank, nothing presented here should be construed as either an offer to buy or sell securities, and does not represent a guarantee by the bank, implied or otherwise, of any financial asset.

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Disclaimer

All written content on this site is for informational purposes only. Opinions expressed herein are solely those of Asset Management Group, Inc. Any material presented is believed to be from reliable sources and we make no representations as to its accuracy or completeness. All information and ideas should be discussed in detail with your individual advisor prior to implementation. Links to other sites should not be construed as endorsement of that site's advice and/or products. Although Asset Management Group, Inc. is a subsidiary of Country Club Bank, nothing presented here should be construed as either an offer to buy or sell securities, and does not represent a guarantee by the bank, implied or otherwise, of any financial asset.