Earnings don’t move the overall market; it’s the Federal Reserve Board…. Focus on the central banks and focus on the movement of liquidity…. Most people in the market are looking for earnings and conventional measures. It’s liquidity that moves markets.
– Stan Druckenmiller (hat tip Steve Blumenthal)
The Federal Reserve will soon have a new chair, assuming the Senate confirms Jerome Powell as Janet Yellen’s successor. Yellen’s departure will reduce the nominally seven-member Board of Governors to only three. That may or may not be a good thing, depending on some other events.
In fact, in talking with some of my Fed-watching friends, it appears the world’s most important central bank is about to experience some potentially profound changes – not just in personnel but more importantly in the kind of people who lead it. Those changes could, in turn, have some serious economic impacts; so it’s worth taking a deeper look.
First, let me remind you that early bird rates will expire soon for my Strategic Investment Conference, next March 6–9 in San Diego. We’ve received a great response even without announcing all the speakers yet – and I do have some more big names pending. Several people you don’t want to miss are trying to clear their schedules. You can wait to find out who they are, or you can register now and save yourself a few hundred bucks. It should be an easy choice. Everyone who comes always says that my conference is the best. Click here to learn more.
Nonmusical Chairs
Before we get into the impending changes at the Fed, let’s quickly review how the organization works. For some of you this review will be too elementary, but even many sophisticated investment people really don’t have much understanding of the inner workings of the Fed.
The Federal Reserve System consists of the Federal Reserve Board of Governors, which is a federal agency, and twelve regional Federal Reserve Banks. The Fed banks are “owned” by the member commercial banks in their district, but the Board of Governors appoints one-third of their directors.
Source: Federal Reserve Board of Governors