Abbott: Strange as it may seem, they give ball players nowadays very peculiar names.
Costello: Funny names?
Abbott: Nicknames, nicknames.  Now, on the St. Louis team we have Who's on first, What's on second, I Don't Know is on third--
Costello: That's what I want to find out. I want you to tell me the names of the fellows on the St. Louis team.
Abbott: I'm telling you.  Who's on first, What’s on second, I Don't Know is on third--
Costello: You know the fellows' names?

Many of you may be too young to remember the American comedy duo, Abbott and Costello, and the old, infamous “Who’s on First” skit. The skit referred to nicknames of baseball players and the positions they played on the field, including “I Don’t Know” who played third base. A new survey reminded me of “I Don’t Know” is on third.

Pew Research has released a survey stating that only 24% of Americans were able to name Janet Yellen as the current chair of the Federal Reserve. In some ways, it is not shocking the masses are not familiar with her; however, this is down from an October 2009 survey, where 33% of Americans knew Ben Bernanke was chair.

 I think this speaks to the market and the economy in different ways. I am fond of saying that no one ever purchases a pair of Nike shoes because of Fed policy, but the policy is supposed to be that invisible hand influencing such buys. Still, the idea that regular investors take their cue from the Fed is folly which results in the traders and trading programs overreacting.

The bottom line is, the Fed does not work anymore. On that note, it never really worked, in part, because its true designs never had anything to do with Main Street. The Fed is pumping money into banks, and banks are pumping money into US treasuries, and they now own almost $2.0 trillion worth. I say it is time to end the Fed. All of the gimmicks are just buying us time and are giving us a false sense of confidence, enabling more dumb mistakes; like $18 trillion in debt for profligate government spending. So, “I don’t know” should be “It doesn’t matter.” Let’s close the Fed shop once and for all.

Message of Market

Yesterday’s session was a tug of war which underscored downside risk. In fact, piles of cash remain on the sidelines looking to get into the mix. This is the beginning of earnings season, so jitters are understandable, but the nature of trading with rotation into blue chip names leaves the already volatile tech and small cap names, even more volatile.

Last week, shares of eBay popped with the news that the company was considering a PayPal spinoff. This week, we started with big news that Hewlett Packard is set to split into two publicly traded companies. Even so, in both cases, management is looking to unlock value. The reactions in these stocks, as well as sharp moves for other reasons, including market crashes belie the notion share prices are efficient. Some smart people swear by the Efficient Market Hypothesis (EMH). The theory says that it's impossible to "beat the market" because stocks always change hands at fair value, reflecting the fact that all information about the company is known to all investors. Unfortunately, in real life, it is like being in a great library: all the information is there, yet there is just not enough time to absorb it all. Nevertheless, I have been engaging in this debate with Ben Stein for a decade. He believes that no one can beat the market because all the available information about each company is for public consumption. This is true, but availability does not mean people read all of the information. In fact, most people don't, including professionals.

Right now, this still looks like a consolidation phase, but it is a tenuous time. Make sure you have a fair amount of cash and be prepared to ride out gyrations in good names, especially those that are high- beta, but great businesses with strong growth.

Today’s Session

Lots of people keep trying to predict what the next Black Swan will be, which is kind of weird as it’s an event of unknown unknowns that hit the economy and the stock market from out of the blue. So while many investors wait for a Fed induced crash, major corrections haven’t been sparked by taking away the punch bowl. Instead, serious overvalued equities markets (twice), Iraq’s invasion of Kuwait, the Asian currency crisis, and the housing crash have affected the market. Not all unknown unknowns have heavy implications, although their impact may be worse than advertised.

Right now, the only thing that counts as an unknown unknown is the potential for Ebola to either spread through the western world or fear of the spread grip those economies. Make no mistake, where Ebola is running rampant, there has been a major economic impact. Last year, Sierra Leone was the second fastest growing economy in the world, and Liberia was number six, but their GDP growth estimates have been sliced by the International Monetary Fund (IMF) thanks to Ebola.

The IMF has also lowered its outlook for global economic growth in general for this year and 2015. It fears that there are weaker expansions occurring in Japan, Latin America, and Europe. Naturally, the negative discouraged many market observers. However, we note that the IMF raised growth estimates for the US economy to 2.2% from an earlier estimate of 1.7%. The bias is to the downside, and I am content to let stocks drift, as well as prepared to buy on the weakness.