The road to perdition has ever been accompanied by lip service to an ideal.
Albert Einstein
Artwork of the Day
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| Courtesy of Brazilian artist Cildo Meireles via financial newsletter |
Obama gave Bernanke the kiss of death on reappointment by pointing out that Bernanke has already mentioned moving on. Who will replace him? This has to be the easiest call since Obama named Solicitor General Kagan to SCOTUS. There is no announcement yet, so how do I know? If there's one thing Obama knows, it's symbolism. The vice chair of the Federal Board of Governors is a woman, Janet Yallen, an inflation dove, i.e., someone any inflation hawk like myself, with a high priority on sound money, would strongly oppose. (Don't be fooled by her recent rhetoric paying lip service to inflation; this is like Obama's familiar tactic of trying to co-opt the political opposition--remember Obama's disingenuous support of traditional marriage? She's anticipating the objection and wants something on the record for the benefit of her Senate confirmation allies. This kabuki dance is so damn predictable.) Do you think that ideological feminists, still furious that Susan Rice was passed over for Secretary of State, will allow him to overlook the opportunity to appoint the first female Fed Reserve chair? Are you kidding? Yallen, unlike Rice, is a legitimate qualified candidate for the target promotion.
This is not an investment blog, but there have some interesting themes going on: precious metals like gold and silver are in a slump, even as it seems like every central bank has been printed paper currency. If you look at gold as a currency hedge against a depreciating dollar, why have we seen precious metals correct--other than the old saw about corrections being inevitable in any market? Well, of course, we saw the gold market slump after the early 1980's after Volcker raised interest rates, effectively strengthening the dollar. Consider the following chart; there's not a perfect inverse relationship--note points A and B where both dollar and gold prices are strengthening. I sometimes like to think of central bank gold transactions in terms of money supply, e.g., selling takes money out of circulation. Generally, though, with most central bankers worried about deflation (as in Japan), gold buying might be seen as a tactic against currency becoming too strong, making imports cheaper and exports more expensive.
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| Courtesy of Incredible Charts |
What I find enigmatic is Bernanke's decision to suggest that he might taper down the Fed's indefinite asset buying spree, which in part has been propping up the stock market. What motivated that? A smaller government deficit and sufficient foreign demand to offset Fed purchases? Recent spikes in 10-year notes despite Fed purchases? A recognition that Fed policy hasn't been able to restore long-standing growth trend lines? Or is he merely setting the stage for even more dramatic Fed activist policy? Or was this basically just a badly worded gaffe? Surely he can't believe with weak job growth, the economy is now healthy enough to sustain itself? Or Fed policy has so distorted the economy he needs to see how the economy can do without a constant sugar high?
I did see one commenter's discussion which said, forget about all this misdirection about tying Fed policy to the second mandate (unemployment): he claimed Bernanke is mostly obsessed about avoiding deflation (recall Bernanke's academic specialty is the Great Depression), and each new QE leg up was prefaced by a plunge in expected inflation rates.... Maybe the answer to this mysterious Bernanke softening reflects an assessment he no longer sees a deflationary risk in the economy.... That could be problematic to most of us inflation hawks.
As for stocks, whereas a case could be made stocks weren't pricey before the recent 4% drop, given a sluggish global economic recovery, I think investors should not have unrealistic expectations about extended sustained gains without more robust growth across the economy.
Political Humor
The NSA says they have developed a robotic bird that looks and flies like a bird to use for surveillance. So if you see a bird outside your window tweeting with a BlackBerry, it’s spying on you. - Jay Leno
NSA leaker Edward Snowden somehow managed to get out of the U.S. with all their information. Now where is he? He's in Russia now, going to be in Ecuador or wherever. He remains at large. Now what are the odds out of 350 million Americans, the only one the government wasn't watching was him? - Jay Leno
Chris Christie, James Gandolfini and Flags at Half-Staff
I don't mean to be disrespectful to the memory of the late cable TV male lead actor, but I have to question Christie's subsequent decision to order flags lowered to half-mast. According to the Department of Veteran Affairs:
An easy way to remember when to fly the United States flag at half-staff is to consider when the whole nation is in mourning. These periods of mourning are proclaimed either by the president of the United States, for national remembrance, or the governor of a state or territory, for local remembrance, in the event of a death of a member or former member of the federal, state or territorial government or judiciary. The heads of departments and agencies of the federal government may also order that the flag be flown at halfstaff on buildings, grounds and naval vessels under their jurisdictionI Believe the Children Are Our Future
Political Cartoon
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| Courtesy of Michael Ramirez and Investors.com |
The Beatles, "I Saw Her Standing There"
