Selective hearing

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Federal Reserve Fruitcakes Have Nobody to Blame But Themselves

bernanke federal reserve

Federal Reserve Chairman Ben Bernanke took plenty of heat lately after Wednesday’s FOMC event that revealed no tapering to monetary policy was in the works.

But as usual, Federal Reserve critics are simply lost in their own echo chamber. Those who say that the Fed surprised investors — including the Wall Street Journal, which wrote on Friday that Bernanke suffered “a large failure of nerve” — haven’t been paying attention.

So says Dan Wiener, the editor behind the Independent Adviser for Vanguard Investors, who lays blame on Federal Reserve expectations with the media and pundits, not with the Fed chair.

Wiener writes:

Come on, get off your high horses and admit, all you complainers, that (a) you got it wrong, (b) you heard what you wanted to hear, not what was said, and (c) that Ben Bernanke’s Fed has been the most transparent Fed ever, period.

… The notion that the Fed’s Wednesday meeting creates doubt about how effective they are in communicating their actions is hogwash. As I noted after Bernanke’s June 19 press conference, his references to cutting back QE3 were peppered with the word “if”.  Seven times in three paragraphs Bernanke clearly said that conditions would have to meet certain thresholds before cuts would occur. But no one seemed to be listening.

Both the press and Wall Street are culpable. How could any reasonable person, seeing the economic data coming through in the months since June, have concluded that conditions had been met to “taper”? Unemployment at 7.3%, falling in large measure due to lots of sub-par jobs being created? No. Inflation at less than 1.5%? No. Jobless claims falling to, at best, normal but not great levels? No.

Strong sentiment.

It also happens to be the correct sentiment.

Hearing what you want to hear is a dangerous way to invest, and an irresponsible way to run a media outlet.

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Jeff Reeves is the editor of and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at or follow him on Twitter via @JeffReevesIP.

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