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Ignore the Ministers

   

Several times a year, finance and economic ministers from the seven or 10 largest industrialized nations get together for a powwow. In addition, their peers from less affluent countries get together twice a year for meetings of the World Bank and International Monetary Fund.

These meetings are covered by scores, if not hundreds of journalists who hang on each and every word coming out of the ministers' mouths. Reporters are looking for changes in economic policies that will affect growth, inflation, exchange rates and other key areas of interest to investors.

At times, these meetings of bureaucrats actually have resulted in substantial policy shifts and real world results. The Plaza Accord of 1985, for example, was remarkably successful in driving down the value of the Yen.

But for the most part, these meetings are massively oversold by the financial press and by the ministers themselves who need to justify their global junkets. While the meetings often end with the issuance of a communique, they turn out to be nothing more than a fancy press release promising vague cooperation in the hot topic for that year.

That's surely understandable. If interests coincide, these nations will act in concert but no industrialized nation is going to adjust is economic policies merely to suit the wants of six or nine other countries. And even when there is change, most stock and bond markets do not react nearly as much as the foreign exchange market, which after being barraged by three or four days of news wire flashes, usually settles down.

Bottom line: meetings of bureaucrats certainly don't hurt the world's economy and may even help to improve coordination. But for long-term stock and bond investors, they are irrelevant. Investors should continue to stick to the fundamentals of the companies they own.

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