Cockadoodledoo

According to Ben Bernanke, his research shows that the Fed's asset purchases boosted stock prices and helped the economy out of recession. That settles it folks, once and for all. Aggressive Fed intervention is critical to the success of our equity market and our economy. That without the genius of the Fed, stock prices can't rise and the economy can't grow.

As a side note, I just interviewed a rooster; and his research shows that his particular cockadoodledoo every morning is the reason the sun keeps rising.

Short-term guessing with other people's money - And - Perpetual Cronyism - And - As for Bernanke's Speech

Just listened to Credit Suisse's director of U.S. fixed income policy explain how their short treasury position (betting on a price drop) didn't pan out this morning - as they guessed wrong in terms of what Bernanke would commit to in his Jackson Hole speech. Now it's one thing to speculate, conversationally, on the moves of any given policymaker (or committee) - left to his (their) own biases - it's another altogether to risk other people's money based on such subjectiveness.

The articulate young man described what he had expected, why now he believes he didn't get it, and when asked if Bernanke would be swayed by pressure from politicians, he said "look, politicians make decisions for the good of the country" and (I think) went on to say something about the Fed's motives. After he made his remark regarding politicians, some chemical reaction in my brain entirely thwarted my ability to listen further or to give the slightest modicum of credence to anything this young speculator had to say. I would wager that this thirty-something "genius", rather than being the victim of extreme na

Market Commentary (audio)

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The Bernanke Effect - and - The Best thing for Your Portfolio

I read somewhere (I think it was Barry Ritholtz book Bailout Nation) that Alan Greenspan's first utterance when stepping off of a plane, while some crisis was brewing, was "what's the market doing?" As the Greenspan story goes, during the heydays of the '90s, he couldn't grab a bite in a Wall Street restaurant without having to meander through a standing ovation on the way to his table. "The Maestro" they called him.

Milton Friedman, as you might imagine, was on the very short-list of potential Washington appointees. But while he was more than willing to give private counsel to policymakers - which he did (but, alas, he says they never took his advice) - he made it very clear that he was of better service to the "ordinary man" in his capacity as a teacher. He said (words to the effect) that when one takes a position in Washington one must become a team player, and that simply wasn't his style. As for Greenspan, I've read a few of his writings from the days he clung to the coattails of Ayn Rand, and I can tell you, when Greenspan became the chairman he became the poster-boy for team players. Truly, the bailouts orchestrated by Greenspan the maestro would have received a blasting condemnation from Greenspan the Randian.

I can't speak as confidently to the history of present chairman Ben Bernanke. I don't know that he, like Greenspan, was a once free-market ideologue, later to be captured by the political process. But regardless of his upbringing, it is abundantly clear, with QE3 in the offing, that he guzzles the Kool Aid.

Here are a few of this week's headlines:

"Bernanke's Words Could Make or Break Market Rally"
"Chance of Fed QE3 Dims for Economists and Investors Alike"
"Global Shares Dip, Euro Steadies Ahead of Bernanke Speech"
"Euro Equities Drop on Eve of Bernanke Speech"
"Rupee Range-Bound Ahead of GDP, Bernanke Speech"
"Precious Metals, Other Markets to Take Cue From Bernanke Speech"

Now, just for fun, replace Bernanke with your last name. Now you tell me, with all of mankind hanging on your every word, and knowing what the markets want, would you confess that, after pumping trillions into the financial system, it's become glaringly apparent that the present economic anemia is in fact a structural, as opposed to a cyclical, phenomenon. That you can prime the pump till you're blue in the face, and while you would surely enjoy the applause next week when you dine at Delmonico's, the net economic effect of another round of QE is going to be zip.

Here's the thing folks, the market is already awash with liquidity and interest rates are lower than my wildest dreams could have ever conjured up. Another trillion of bond-buying would surely boost equity prices for a moment, but, I assure you, monetary easing has never been more unnecessary than it is today. And, alas, over-easing, as we've learned from the era of the Maestro, can lead to some amazing, and most pernicious, asset bubbles (the obvious, presently, would be the bulging bond market). So if he does the right thing (turns off the spicket), which I don't suspect he will, expect stocks to take an immediate hammering. And understand that, while you won't enjoy opening the envelopes sporting your next few monthly statements, taking the market's eye off the Fed and onto the prospects for future corporate earnings would be the best thing, longer-term, for your portfolio.

The Fishermen are Sleeping In

On most Thursday mornings, beginning in May and ending sometime mid-summer of each year, a Department of Fish and Game tanker loaded with dozens of squirmy 8 to 14 inch rainbow trout pulls up to a tiny reservoir about an hour’s drive north of Fresno, and sets them free.  Although I’m not sure “free” is an apt description of a trout’s existence in what amounts to an over-sized moss-infested pond, where only the heartiest of carp and a few catfish will survive the blistering heat of the coming August.

So why would the California Dept of Fish and Game do such a thing?  While I’ve yet to explore the economics of trout-planting—although we’re talking government so it wouldn’t be pretty anyway—it obviously has something to do with fishermen.  Those men’s men who—rather than sleeping in like city folk and later visiting the corner grocer to snatch the protein for the evening’s supper—will rise with the roosters, pack their trunks with rods, reels and split-shot sinkers and venture off to test their angling skills (and a fresh jar of glow-in-the-dark bait that smells just like the fish food at the hatchery) on the unwary salmonoids…

It is no doubt in the Department’s best interest, for whatever reason, to cater to the animal spirits of the Central California angler.  To get him out of the recliner and into the sporting goods store to purchase the government-issued license along with all the necessary tackle.  And/or perhaps to send out a game warden to lie in waiting behind a pond-shore bush in hopes of surprising the cheater who skipped the licensing part, and slapping him with a $400 (no kidding) fine.

We’ll call it a staging—an artificial catering to man’s primal urge to bear the wilds, to take the risks necessary to provide for his family.  But, alas, while most vivid on Thursdays, this grand illusion fades by Sunday.  And by the time Wednesday rolls back around, the returning gentleman, now with 6 grandkids in tow—anticipating another day of great fishing—drives away empty-ice-chested, and bewildered, in a very muddy (6 impatient yet playful junior anglers) sedan—indeed uninspired to return. The fact of the matter is a stagnant pond simply cannot sustain the type of fish you and I would bring home for supper.

Now let’s think in terms of fiscal and monetary stimulus.  The economy’s barely moving, and rather than clearing the muck and allowing the flow of fresh current, our “leaders” have been further damming the pond with new regulations and the threat of higher taxes.  It’s like expecting folks to come fishing when the pond is choked with moss and the DFG just doubled the price of a license.  Washington can toss in one-time incentives (Cash for Clunkers, Homebuyers Tax Credits and the like) and the Fed can plant billions a month till the cows come home, but until they pull the garbage (themselves) out of the back end of the pond, the fishermen, I’m afraid, are sleeping in.

Today's TV Segment (video)

Follow up to this morning's post ("my take on taxing home sales")

The email message I included in this morning's column suggested that anyone selling a home would pay a 3.8% tax on the entire proceeds. That would be factually incorrect. To the extent one would suffer the tax is subject to several parameters. Here's an excerpt from factcheck.org on the subject (btw I see where both sides of the aisle have accused factcheck of playing politics. I think we're safe on this one - the facts appear to leave little room for partisanship):

"The truth is that only a tiny percentage of home sellers will pay the tax. First of all, only those with incomes over $200,000 a year ($250,000 for married couples filing jointly) will be subject to it. And even for those who have such high incomes, the tax still won