When freshly installed Fed Chair Janet Yellen went before Congress yesterday, she mostly followed the script written by her predecessor, Ben Bernanke. But now that she's in charge, everything she says will carry a great deal of weight.
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- Fed Strategy from Mohammed Ali
People are viewing the end of stimulus as a sunset. "My, what a wonderful day we've had," they say.
What they should be doing is investing for tomorrow's dawn - the turmoil we're seeing now as part of Yellen's arrival is actually par for the course.
It's also a great time to lock your sights on four companies that will lead the way when the smoke clears... Full Story
Bernanke's actions last week - failing to taper, yet still trying to maintain the illusion that QE is a good thing - are setting up a one-two punch that's not unlike boxing champion Mohammed Ali's famous "float like a butterfly, sting like a bee" approach.
If you recall, Ali was a master of the combination - some say the best ever. He loved to bring his opponents in close. Ali could see through the duplicity of his opponents' strategy and land punches that won decisively.
Ali did that using combinations that were based in fighting terms on two contrasts: high-low or short-long, or even left and right. He pressed every advantage he could find, even when others thought there were none to be had. Knowing he wanted to go the full 15 rounds, Ali developed a strategy that would become known as the "rope-a-dope" as a means of tiring out his opponents early on, then vanquishing them in later rounds when the fight really began.
I think we should take a page from Ali's playbook and split the "fight" Bernanke's presented us with into two distinct time zones: the current "round," and those that happen down the line. One short. One long.
Is that possible?
Absolutely. What's more, it's easy to do.