Why Ken Fisher Doesn’t Try to Predict the Fed
Ken Fisher explains why he does not attempt to predict Federal Reserve actions, arguing that Fed members are fundamentally unpredictable. He compares the Open Market Committee's behavior to that of chimpanzees or crazy people, citing over 50 years of skepticism toward the Fed. He also emphasizes that no single central bank should be viewed in isolation — the totality of global central banks matters more.
Summary
In this video, veteran investor Ken Fisher addresses a question he says he has received throughout his decades-long career: why doesn't he forecast what the Federal Reserve will do? Fisher begins by invoking William McChesney Martin, the longest-serving Fed chair, who famously joked that upon taking office, one takes a pill that makes them forget everything they previously knew — and the effect lasts exactly as long as they hold the position. Fisher uses this anecdote to illustrate the inherent unpredictability of Fed leadership.
Fisher extends Martin's principle to the entire Federal Open Market Committee, a 12-member voting body whose members frequently disagree. He notes that even the Fed chair must act as a persuader and consensus-builder, making the collective body even harder to forecast. Fisher colorfully compares attempting to predict the FOMC to predicting the behavior of chimpanzees in a cage or a group of irrational people — asserting that the exercise is largely pointless.
As a self-described lifelong critic of the Fed spanning over 50 years, Fisher argues that the Fed makes wrong decisions more often than right ones, which compounds the difficulty of prediction. He also points out a recurring pattern: the Fed announces forward guidance about its intended actions, but external world events frequently cause it to reverse course on short notice, making prior predictions obsolete.
Fisher concludes by broadening the frame: he argues that investors should focus on the totality of global central bank activity rather than fixating on the Fed alone. While the Fed is important, so are other major central banks, and their collective behavior is what truly shapes global financial conditions.
Key Insights
- Fisher invokes William McChesney Martin's famous joke that Fed chairs take a pill upon appointment that makes them forget everything they knew — lasting exactly as long as their tenure — to argue that Fed leadership is fundamentally disconnected from prior knowledge and therefore unpredictable.
- Fisher extends Martin's 'pill' principle beyond the Fed chair to all 12 members of the Open Market Committee, arguing that the collective body is even harder to forecast because members frequently disagree and the chair must persuade them toward consensus.
- Fisher, identifying himself as a career-long critic of the Fed for over 50 years, argues that the Fed makes wrong moves more often than right ones, and compares predicting its behavior to predicting the actions of chimpanzees in a cage or a group of irrational people.
- Fisher argues that even when the Fed publicly signals its intended future actions, those forward guidance statements become unreliable because unexpected world events frequently cause the Fed to reverse course entirely on short notice.
- Fisher contends that investors should focus on the totality of all major global central banks acting together, not just the Fed in isolation, arguing that the collective behavior of the world's central banks is what truly matters for understanding global financial conditions.
Topics
Transcript
[0:05] So, many people that have paid attention to my commentary over the decades know that I have absolutely no history of forecasting what the Fed, or, for that matter, other central banks of developed nations or the eurozone, do. I'm just not been someone to forecast that. And they sometimes ask, why is it you don't forecast what the fed will do? Everyone else seems to. And the answer is, well, [0:40] the longest serving head of the fed, who I often quote, William McChesney Martin, somewhat famously said that when you become the head of the fed, you take a little pill and it makes you forget everything you ever knew, and it lasts just as long as…
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