This week’s Federal Open Market Committee (FOMC) could be the one where the Federal Reserve finally raises rates and reduces asset purchases. It’s still anyone’s guess until the announcement is made this Wednesday. But in anticipation of the event, CNBC shares a news release that says Bill Ackman met with the New York Fed and told them to begin the rate raising process. He’s quoted saying:
The bottom line: we think the Fed should taper immediately and begin raising rates as soon as possible… We are continuing to dance while the music is playing… and it is time to turn down the music and settle down.
Interesting what makes the news these days. In this instance, it’s probably because Bill Ackman heads Pershing Square Holdings, which has over $13 billion of assets under management. Apparently, when you are rich, powerful and well connected, and you meet with central bankers to tell them how to do their job, it makes for headline news.
This does not constitute investment advice, but Ackman tweeted:
As we have previously disclosed, we have put our money where our mouth is in hedging our exposure to an upward move in rates, as we believe that a rise in rates could negatively impact our long-only equity portfolio.
Why does this matter?
The short answer: It doesn’t. The real interesting thing is the fact that these types of stories make for headlines and the broader picture being what it says about the state of society.
Understandably so, being a billionaire has perks, such as a celebrity status and maybe even a cult-like following. But remember, there will always be billionaires. Ultimately there are always Bill Ackmans of the world who become “a winner” after a series of entrepreneurial risks paid off in his favor. The real mystery lies in wondering what Ackman’s success has to do with knowing when the Fed should raise rates.
How one individual could be so close to the New York Fed, such that they might be privy to information the public doesn’t have, or in a position to influence the Fed in a way that few could ever dream, is also intriguing. It’s unclear who directs monetary policy in America at this point. But what is clear is that the slant is to protect those most closely connected to the Fed first.
If Ackman called out the system that allows him to meet with the New York Fed and (possibly) confirm a rate rise prior to the official announcement, that would have made for a better news story… yet he may feel no desire to help society at large.
It speaks to the system we are currently in. That a billionaire should know when it’s time to raise rates is just as problematic as a handful of central bankers knowing when is the right time.
We are stuck in the predicament of having planners who are supposed to know, or having global elites who instruct the planners because they somehow know the answers for them. The guru, the pundit, the well-paid bureaucrat or the billionaire; whether it’s the economic calculation methods they possess or the higher level knowledge over economic affairs, it will always be absurd that society is moved by those who can hardly defend the reason for their beliefs.
Ackman addressed a concern regarding his stock portfolio. The real problem is not whether the Fed should raise rates on Wednesday. The problem is that the Fed has the ability to raise rates on Wednesday.
