Tags: Faceoff | Value | Technical | Analysis

Former Fed Official Poole: Central Bank Going Too Far in Helping Press Predict Rate Strategy

Former Fed Official Poole: Central Bank Going Too Far in Helping Press Predict Rate Strategy
(Dollar Photo Club)

By    |   Tuesday, 13 October 2015 10:07 AM

Here are a few observations regarding the ongoing battle over the House speakership before I discuss a spirited debate I witnessed regarding the merits of technical analysis.

In earlier posts, this writer has placed the current struggle in the context of decades of strife and has referred to the potential for a similar contest to develop in the Senate, although the two houses have much different cultures even though many legislators serve serially in both bodies.

While channel surfing, this writer found remarks by a senior House Republican, Darrell Issa, R-Calif., who was unburdening himself of two complaints about the state of the struggle.

He criticized his successor as Chairman of the House Committee on Oversight and Government Reform, Rep. Jason Chaffetz, R-Utah, one of the many candidates for speaker, as having been unproductive in the job because he is reluctant to upset colleagues.

Issa went on to provide valuable insight into the underlying problem members face in choosing a speaker. He complained that when the speaker needs votes, he and other leaders tell a member, “We really need you on this one,” and that member says, “This is what I need from you.”

Speakers tend to lose track of their side of these bargains, and as they do their credibility wastes away.

Meanwhile, Friday’s event, entitled “Using Technical Analysis in Investing,” hosted by the Global Interdependence Center at the Federal Reserve Bank of Philadelphia, took the form of a debate between Bill Poole, former president of the Federal Reserve Bank of St. Louis, and Katie Stockton, chief technical strategist at BTIG.

Before the debate, this writer resumed an ongoing discussion with Poole over the state of the FOMC’s deliberations about when to raise interest rates. 

I recalled his last speech as president, as he was preparing to cast his final vote on the FOMC, and his dogged resistance to efforts by the press to get him to commit, or even to predict, how he would vote.

Poole emphasized that the process was a deliberative one at the meeting, based on data and information available then.

Later, when an attendee asked about the current monetary policy debate, Poole told the audience that the materials for each FOMC meeting are prepared by the staff a week ahead of time, and he recalled that at the time of the October 2008 meeting, which occurred in the middle of the crisis episode,

AIG was bailed out and Lehman Brothers failed between the time the materials were prepared and the time the meeting was held.

He told this writer that he thinks some of his colleagues are going too far in trying to help the financial press predict what the FOMC will do.

On the Resources page of the GIC website, the presentation on the right presents the argument by Poole that technicians are not in fact able to discern patterns that can predict changes in price from which investors can profit.

On the left is the presentation by Stockton, who counters that this is what technicians do, even though they won’t necessarily share their indicators and methods, and the key point is to realize that this is an art, not a science.

For example, this writer once sat next to a technician from Dallas who explained that one of his indicators was to drive by the parking lot at Texas Instruments and count the cars.

It is noteworthy that Stockton finds the bull market still intact and identifies far more breakouts than breakdowns in her favorite indicator, the Moving Average Convergence Divergence (MACD) as applied to the S&P 500.

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Before talking about a spirited debate this writer witnessed regarding the merits of technical analysis, a few observations regarding the ongoing battle over the House speakership.
Faceoff, Value, Technical, Analysis
Tuesday, 13 October 2015 10:07 AM
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