I was slightly amused at some of the pundits yesterday talking about how the Dems pick for a “dovish” Fed President was going to be the ticket. Then lo and behold Yellen hit her first press conference post FOMC meeting with claws out and looking for timid mice. Nah, I don’t buy it. I think that she’s still the same Dove that she’s always been, but as with a lot of academic types, you put them on the spot to ad lib and too much starts going through their head and comes out of their mouth. Too many people have been praising her for being a woman who talks in more simple terms. That of course is the absolute problem with her at the helm. Nothing against women, but I think Yellen is trying too hard to make everyone happy. The one thing she is not is confrontational. As with most women I know, they are looking for a balanced solution to problems. No that it’s a bad thing, but this is monetary policy and you have to put a lot of people in place. I think that’s the thing that Bernanke grew tired of. By the end of his term, most of the other Fed Presidents disagreed with him and he just wasn’t interested in playing politics. I first thought that Bernanke must be bitter with all of this praise heaped on Yellen, but I think he knows the worst is still ahead.
I’ll tell you as an investor, I’d be worried about Yellen. For as many people are thinking this was only her first presser and it was only “one statement”, it was her off the cuff stumble that caused the market to panic. No matter how small, that’s not how you want to see the Federal Reserve President start her term. Now I’m thinking that anytime she goes off script, something could get misinterpreted. If she decides to be “folksy”, more people are going to wonder how much is she really able to interpret. Gomer Pyle is folksy and I sure don’t want him running my Fed. I said this after her testimony in front of Congress last month, I’d rather have a Fed President that I need to look up terminology rather than a 5th grader getting the big picture. All this is making me concerned is that we now have a Fed President that can say anything without a real understanding of market influence. Any argument from anyone, I can tell you that it’s highly unlikely that the FOMC members were sitting around the table yesterday and said, “Hmm, we’ll get to raising rates after we stop buying bonds. Let’s say about six months.”
If you can see the problem here is it’s just so simple, folksy. An arbitrary number thrown out “about six months”. Can someone please explain how based on economic principles and fundamentals how one can come up with “six months“? I don’t know if the market is foolish enough to believe in what she said or if she was really that foolish to make that number up. If she didn’t make it up, that’s the other thing I’m concerned about for the markets. By now we all know that Greenspan’s “irrational exuberance” was a planned and suave way for that Fed President to take the then fluff out of the market. It worked well and it’s part of his legacy in directing one of the biggest and best growth periods in the market. With Yellen starting her term trying to manipulate the market, it’s a little disturbing. She’s not proven anything to anyone as Fed President and why are we going to leave the fate of our market and economic growth in someone who thinks they can wield this power on day one?