May 23, 2013
When a doctor takes a patient off his meds, he does so usually only after the patient has shown sure signs of recovery. Generally, the patient himself realizes when he no longer needs the meds.
What the market seems to be implying in today’s sell off is that Dr. Bernanke and his colleagues at Hospital Fed will begin tapering before the patient (the U.S. economy) is sufficiently healthy. And that is where the market has got it wrong– Bernanke made it clear in his testimony yesterday that the Fed won’t begin tapering until there is clear evidence that the economy is strong enough to sustain itself. Tapering by itself is not the issue. If the patient has recovered, he won’t need the meds. Based on his record over the past several years, we can trust that Dr. Bernanke and his colleagues will know when to withdraw the meds.
We should use today’s weakness to buy names we like.
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