Richard W. Fisher served as the President and CEO of the Federal Reserve Bank of Dallas from A.D. 2005 until he retired earlier this year.
CNBC recently published an article entitled, “Fed’s Fisher Say’s Market Is ‘Hyper Overpriced,’ See’s A Major Correction”. According to that article, while being interviewed on Squawk On The Street, Mr. Fisher said,
“Are we vulnerable in my personal opinion to a significant equity market correction? I do believe we are, and the reason for that is people have gotten lazy. They’ve depended totally on the Fed.”
First, I view Fisher’s charge against “lazy” investors as an attempt to distance himself and the Federal Reserve from responsibility for he believes is a coming “significant equity market correction” (also known as a “crash”). Fisher is telling all the “lazy” investors “Don’t blame me and the Fed when you lose your assets—it’ll be your own darn fault.”
Nevertheless, despite what may be the self-serving nature of Fisher’s warning, he’s right. Investors depend primarily—and excessively—on the Fed to guarantee their prosperity.
Evidence? Look at stock markets jumping up or down depending on whether Federal Reserve Chairman Yellen says—or doesn’t say—words like “patience”. The markets’ response to Yellen’s mere choice of words is absurd and far removed from rational theory of investing.
Investors have become “lazy” in the sense that they don’t rigorously analyze stocks and corporations and devote great effort to deciding where to invest their wealth. Instead, they tend to invest in almost any stock and expect to profit because the Federal Reserve will essentially guarantee that the equities markets will rise.