The Fed - Which Goblet Contains the Poison?

The scene from "The Princess Bride" in which the dread pirate Roberts challenges the criminal genius Vizzini to a battle of wits clearly illustrates the problems many people get themselves into concerning the Fed's actions. In the scene, Roberts takes the two goblets of wine and adds poison. He then challenges Vizzini to determine which goblet contains the poison. After Vizzini selects, they will then both drink and one will be right and one will be dead. Vizzini considering seemingly all of the possibilities selects the goblet from which he will drink. He also delights in demonstrating his extreme cleverness to Roberts.

The selection process is the same sort of nonsense that occurs prior to each Fed meeting. A post by CXO Advisory shows that during the period around Fed funds rate changes there is no real bias to exploit anyway. The seeming endless speculation on whether the Fed will or will not drop rates by an amount or whether this is fully priced into the market is just a distraction.

At the end of the scene Vizzini dies and we find out that Roberts has poisoned both goblets of wine. He has spent the last few years developing a resistance to the poison so he survives. This illustrates what we should be doing. We should focus on our research, diversification, and position sizing not demonstrating our cleverness in determining the direction of a short term trade that has no edge.