About a dozen years ago, I found myself having a stimulating conversation one sunny day in San Francisco with the great economist Milton Friedman.
It’s a conversation I’ll always remember.
I studied economics in college – in fact, I’m the recipient of an honors degree in that subject – and the tireless free-market advocate was and remains one of my big heroes.
We were standing on the balcony of his spacious Nob Hill condo taking in the sweeping Bay views and talking about economics and Washington politics – as I eyed the huge portrait of him standing in a corner that Friedman’s wife hated and wouldn’t let him hang. Then he looked me in the eyes and said, “You know, Michael, I’d like to see the Federal Reserve replaced by a computer.”
As the 1976 Nobel Prize in Economic Sciences laureate explained it, he felt the Fed had become too obsessed with micromanaging the nation’s economy. Remember, this was a dozen years ago, before the Fed started quantitative easing and heavily manipulating interest rates.
Of course, I’m not suggesting we replace the Fed chair with a robot.
But I always recall Freidman’s thought experiment whenever the markets get choppy, as they have in the past few weeks. And when I see the markets become volatile because of the Fed and the news, I know it’s time for defense.
I’ve before shared with you my five “Choppy Market Tools.” But today, I want to share with you a classic investment strategy that I’ve given a brand-new nickname to reflect our focus on the “New West” of Silicon Valley tech stocks.
I call it the “Cowboy Split.”
And today I’m going to show you that when employed properly the Cowboy Split will protect you from volatile markets.
But that’s not all.