Michael K. Farr is president and majority owner of Farr, Miller & Washington LLC. He is chairman of the investment committee and is responsible for overseeing the day-to-day activities of the firm. Prior to starting FM&W, he was a principal with Alex, Brown & Sons.
Farr is a paid contributor for CNBC television and has appeared on "The Today Show," "Good Morning America," "NBC's Nightly News," CNN, Bloomberg TV, Reuters and the "Nightly Business Report." Farr is heard on Associated Press Radio, CBS Radio and National Public Radio. His market blogs can be found on CNBC.com, HuffingtonPost.com and Politico.com.
He is a member of the Economic Club of Washington, D.C., National Association for Business Economics,The World Presidents' Organization, International Atlantic Economic Society and The Washington Association of Money Managers. He is the author of "A Million Is Not Enough" and "The Arrogance Cycle." His third book, "Restoring Our American Dream: The Best Investment," was released in March 2013 and is available on Amazon.
Farr is the chairman of the Sibley Memorial Hospital Foundation. He also serves on the board of trustees at Sibley Hospital; he is the former vice chairman of the board of the Salvation Army; a former member of the Board of Trustees of Ford's Theatre; the former chairman of the board of directors of the Traveler's Aid Society, Nation's Capitol Progress Foundation; and the Paul Berry Academic Scholarship Foundation. He also is a member of the board of the Neediest Kids.
He graduated from the University of the South in Sewanee, Tenn. He is married and has two children.
The Fed has been on a deliberate path toward inflating financial asset prices, and in this endeavor the central bank has enjoyed much success. Most notably, the stock market is up nearly 19% since the year's low on July 2. The Fed believes that higher stock prices will lead to improved consumer confidence and spending.
In my opinion, it will take several months of positive job additions in the 150K+ range before the Fed feels comfortable that the employment situation is getting better. There is still a very high level of unemployed people as well as people who remain out of the labor force because they are frustrated. Therefore, we would expect QE2 to go ahead as planned.
As the new mix of Democrats and Republicans begins to posture and parry with each other, we hope that they will focus quickly on crucial matters at hand. If the Federal Reserve continues to believe that additional monetary accommodation is necessary to sustain economic growth, then it makes NO economic sense to engage in contractionary fiscal policy.
We remain cautious in this environment. High quality blue chip stocks remain reasonably priced, but investors aren't buying these stocks. We have not seen the type of rotation into high-quality, defensive companies that we usually see when the economic backdrop becomes clouded.
The market's reaction to the Tepper interview seems to us to be another in a long series of overreactions based solely on short-term catalysts, not long-term fundamentals. Investors have become obsessed with turning quick profits by getting in and out of positions at the right time.
The fact that so much supply continues to exist even in an environment of 4.5% mortgage rates is an extremely concerning issue. If sellers can't sell without dropping prices now, what will happen to prices if mortgage rates rise? But ah, we know the government won't let that happen.
There are a few things that may bring the retail investor back into the market in the near term: the elections may deliver a Republican majority in Congress, we are likely to get more clarity regarding the new bank regulatory landscape as the Basel Committee delivers their recommendations over the next few days/weeks and we are likely to get a report on the causes of the "flash crash" that has instilled fear in many a retail investor.