Archive - Aug 2011 - Blog entry

All you need to read

While Ben Bernanke has tried to exude confidence, he is now clearly discouraged. As well he should, since none of the Fed's "suite of tools" have worked as intended and almost every forecast the Fed has given since the Crash has been wrong. We are forecasting a stagnant economy and come the elections it is likely that unemployment will remain high. Like all Fed Chairmen, it will be hard for Dr. Bernanke to resist calls from politicians to "do something." He will earn his moniker as "Helicopter Ben" and unleash more quantitative easing, a dangerous and regressive policy.

Quick answer, "Nothing!" Pros are just wrong, plain and simple. When you're long only, you only have to lose less than the next guy. You don't necessarily have to make any money. Remember that.

With ZIRP, real interest rate on fixed income investment gives a negative return after inflation...

The Euro could be in the final stages of intervention/ bailouts. On September 8, a German court will be ruling whether it is constitutional for Germany to participate in EU bailouts. Consider that 6% of Germans feel the Euro has brought economic disadvantages and that the German elections are scheduled for just a few weeks later, and we could very well see the court rule to end Germany’s participation in the bailouts.

The nonevent of the year. The Fed has put off any serious action to repair the sagging economy until the next (FOMC) meeting on September 20-1. The economy is already humming along well enough to postpone any further stimulative action. In fact, he stated that he expects GDP to be stronger in the second half than in the first. This is in sharp contrast to the market’s opinion that things are going to hell in a hand basket, and that Armageddon is near. Could “surprise” become the most commonly used word in future Fed releases?

Follow that bouncing ball across Europe as it eventually hits home right here on Wall Street. Why haven't we heard about this in the media or the sell side reports?

Although we waxed skeptical here the other day about Warren Buffett’s just-announced $5 billion stake in Bank of America, we allowed for the possibility that the deal will provide a handsome payoff to him no matter what happens to the bank.  B of A could implode, after all, a victim of sinking collateral values for its mortgage loans, and of litigation over its securitized-lending business. 

William James saw an increasing tendency to extend the then budding scientific method of controlled experiments in the physical sciences into intractable social and political problems. He warned it would not work, perhaps as much based on his psychological understanding as his philosophical logic, that is, as the old saying goes, people will be people.

Chart levels to look out for

All you need to read

The response of the market makes sense from the perspective of Pavlovian conditioning.

Sales must increase. That is largely dependent on household formation, which in turn is dependent on growth in full time jobs. And that's not happening.

What about less Debt?

I am not an anti-intellectual...I am an anti-moron of the counter buffoonery school.