I wrote the following article for SeekingAlpha.com and thought I would post an excerpt:

Summary

  • Understanding the type of person that Yellen is will give you insight into FOMC decisions, as per Sun Tzu’s classic words of wisdom.
  • Yellen has shown over the years that she is cautious, meticulous, laid back, planning, consensus-building and pro-growth.
  • When you combine Yellen’s nature with the weight of the recent economic evidence, it should not be a surprise the FOMC statement came out the way it did.
  • Knowing yourself and the other people trying to understand Yellen will lead to a better understanding of the FOMC going foward.

I am constantly amazed at how the markets misunderstand Federal Reserve Chair Janet Yellen. It seems like many FOMC meetings are followed by a fixed income rally. I woke up last Tuesday and saw a very prominent analyst call for a hawkish signal from the Fed. My reaction was, “based on what?!?” I read his explanation and it STILL didn’t make sense how someone could weigh all factors and come up with that conclusion.

Then I thought about something I read a while back in college:

It is said that if you know your enemies and know yourself, you will not be imperiled in a hundred battles; if you do not know your enemies but do know yourself, you will win one and lose one; if you do not know your enemies nor yourself, you will be imperiled in every single battle.

2,500 years later, I am quoting it because it still applies!

The rest of the article can be found here.