Monday, September 19, 2011

Quote Of The Day

"Ironically, by intervening in the free market and arbitrarily setting short- and long-term interest rates at insanely low levels, the Fed is responsible for [business] uncertainty, enabling and propagating speculation - not investing - and eroding confidence about the future.  Usually, in investing, liquid capital turns illiquid when it is committed to a higher, more productive long-term use.  The ability to forecast after-tax cash flows and discount rates is key here.  Speculators, however, are indifferent to what asset they hold (junk or quality).  Their time horizon is much shorter, and they are just looking for a greater fool on whom they can unload their stuff.  The next tick in price is the only variable that matters to them."

-Vitaliy Katsenelson, "Fed is Measuring US Economic Health by the Wrong Number"