In almost any endeavor, it is critically important to believe that what someone is telling you is true.
In the business world, being able to rely on management to do what it says might be more significant than anything else one considers in my view.
Conversely, if a person gets the reputation for embellishing the truth, it can be the kiss of death.
The weak May jobs report, which showed only 38,000 jobs being created versus an expected 160,000, may very well be a critical moment for the current US Federal Reserve Board. Why?
Over the last few months, multiple Fed board members have gone on record noting the strength of the US economy in an effort to convince the investment community that interest rate hikes were a distinct possibility, if not in June then in July.
Given the disappointing job numbers, and the fact the Fed has stated it will be data-dependent in making policy decisions, a reasonable person might question the data the central bank is looking at.
It is also worth asking how accurately the Fed is interpreting the information it is seeing.
Even further, and more critical, is taking the next step and questioning whether the current policy is appropriate given the dramatic underperformance in jobs growth.
Macroeconomic analysis is complex and not easy, which is why many investors, like myself, spend a far greater amount of time concentrating on the microeconomics of specific businesses and their valuation.
It might be a bit of a stretch to imply the Federal Reserve Board’s reputation for integrity is now lost, but its board members’ judgement should be under scrutiny in my opinion.