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Author: MrTompkins Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 20692  
Subject: Re: Bigger Picture Thoughts on Interest Rates Date: 7/10/2013 8:06 AM
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Thanks for the comments. I don't disagree with your assessment of projections especially if one goes back to 2007. The FOMC has been criticized by many for being overly optimistic (and has a track record bearing that out)

But .......

It's a bit disappointing (but not unpredictable -- see Kelbon's initial post) to see that extended to the crowd pleasing Ouija board, Tarot Card, Dart Throwing Monkey comments.

The majority of the post discussed where I though interest rates (real interest rates more importantly) over the next couple of years might trend. So disagree/agree with that line of thinking (which I won't be offended :) or whether its worth the time to develop a framework and "models" (mental/excel) to analyze future movements in rates, inflation, and the economy in general. But I think it is a mistake not to (obviously) and where many make faulty conclusions.

One could plug alternative expectations into the FV models instead of the FOMC projects etc etc. The key is that you can "see" what current expectations are -- like markets now expecting rate hikes sooner than previously expected -- and it works within the FV model. That is why I also use models for stock valuations instead of buying/selling on hope/gut feelings.

Say it another way:

Your point gives me two choices "it is what it is" or fire up the crystal ball (with all the cynicism implied). I say there is a 3rd option which is having a (mental/explicit) model to work the scenario out -- Charles Munger anyone? The 3rd option is the best (but not the easiest) in my opinion because it allows one to make better/reasoned decisions -- and when wrong adjust accordingly.


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