“Over the medium term, participants saw both upside and downside risks to inflation.”
- Minutes of the US Federal Open Market Committee, once again boldly telling it how it is.
Optimism may well play a key role in human
evolution and survival, but in matters of the narrower discipline of investment
it can be a grave threat to the retention of wealth. Which is not to say that
pessimism is preferable, only that the quest for realism – or objectivity – is
likely to be the most rewarding route towards capital preservation and growth.
This is a hard orientation for most investors, given that the financial
services industry, and notably the ethical swamp that is the brokerage
business, has an enduring bias in favour of good cheer. Bad news rarely sells.
But
blind optimism now would be, in our view, exquisitely dangerous. The latest reason
for a considered pause comes with publication of the most recent minutes from
the US Federal Reserve. Fedspeak is a bureaucratic sedative at the best of
times, but sometimes the dry-as-dust language is unable to conceal some real
firecrackers. The minutes from the Open Market Committee of 22-23 June contain
the following observation; it’s interminable but bear with it:
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