Wednesday, September 20, 2023

In the #News #Politics Investors Need to Be Historians

“If you don't read the newspaper, you're uninformed. If you read the newspaper, you're misinformed.”

“Whenever you find yourself on the side of the majority, it is time to reform (or pause and reflect).”

― Mark Twain

Subscriber Comments

Benjamin Strong
People that believe the Fed pulls all the strings over the invisible hand in every market have NOT studied history. History is not a legitimate past-time for wannabe investors and traders. Do not be deceived by it. History is a legitimate topic that has nothing to do with memorizing dates, or waving a flag for political agendas.

The US dollar was rallying in the 1920s as capital withdrew from Europe. Smart money recognize the political and social upheaval, and the increasing threat of war. A secret meeting of what would be defined as G4 today, the United States directed by Benjamin Strong, an influential leader of the Fed, Germany, France, and Britain decided the US Federal Reserve would lower interest rates in an attempt to send capital away from the US to Europe in 1927. The logic was sound to the ruling elite that understood the world of fundamentals taught at all the prestigious schools. The G4 brain trust, a group that believed they pulled all the strings, assumed that money would move toward the fundamentals defined fixed economic laws. We often scream/suggest that fundamentals do not matter in the end, and we'll repeat it again.

The invisible hand viewed the decision as a sign of weakness for Europe and laughed at them the only way it knew how - brute force of capital flows. Money moved even more aggressively into the dollar, and ignored the fundamentals defined by the G4. Intensified inflows into the dollar fueled the stock market rally until the crash of 1929. This outcome caught the Fed and public off guard.

The point of this story is simply. Follow the money, and ignore all the talking heads on the Internet. Either you play this game to survive and thrive, or pose for the camera and quiet retired before the crash. No way, Jerome Powell lasts. He will retire before it gets really bad.

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