The 18th Brumaire of Janet Yellen
November 24, 2013·0 comments
Value investors built careers on a belief system that no longer predicts market outcomes. The Fed's bond-buying has become so dominant that fundamental analysis feels almost quaint. Yet the real damage isn't financial. It's psychological. Smart money managers are watching everything they've built their identities around stop mattering, and there's no consensus on when, if ever, that changes.
- The story that matters most isn't about the economy anymore. It's about the Fed. Two prominent bearish fund managers recently capitulated not because they think markets will rise, but because they've accepted that central bank policy, not earnings or cash flows or business fundamentals, is what determines stock prices.
- This isn't seen as a temporary problem. The Narrative of Central Bank Omnipotence has become so entrenched that even those fighting it have begun to accept it might be permanent. The old assumption that markets would eventually "return to normal" is quietly being abandoned.
- Secular stagnation may not be an accidental byproduct of Fed policy. It might be baked in. If quantitative easing and zero interest rates have restructured how capital markets work at a fundamental level, then the world that created the need for those policies in the first place may no longer exist.
- The real crisis for professional investors is existential, not financial. Traditional value investors are experiencing what Marx called alienation: separation from the meaning of their labor. Their entire skill set, their decision-making frameworks, their professional identities are becoming decorative rather than determinative.
- The bigger question beneath all this is about whose interests the dominant investment narratives actually serve. If the stories we're told about how markets work shape our behavior as investors, who benefits from us believing those stories? And what happens if we stop?
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