Feeding Bears, Jos A. Banks, and The Fed

I have been reading articles by Vitaliy Katsenelson.  If macro is important to you, you should subscribe.  There is a signup link on the article below. This one appeared recently and I found the parallel he drew useful.  It deals with an easily avoided business mistake found in business management for beginners.

“Your minimum price will become your maximum price as soon as you say it.”

The article is entitled  “Jos. A. Bank and the Folly of Quantitative Easing

The gist of the article is that you cannot achieve long term goals by cutting prices.  Doesn’t matter if it is “Buy One Suit Get Three Free” or quarter point interest rates on loans to banks.  The problem is making the offer work on the supply side.  How do you get the price back up?

I am reminded of the sign in a national park.

Do Not Feed The Bears!!

There Is No Way To Explain To Bears
That You Have Run Out of Cookies

The problem central banks will have raising interest rate will be similar to the unsuspecting tourist feeding cookies to the grizzly bears.

There is a single defense for people.  Do not start anything that you are unwilling or unable to do forever.

As an investor, you might try to anticipate how the central banks will change to something rational and in what order they will do it.  Watch for the canary.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario.  In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you.  don@moneyfyi.com  866-285-7772

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