Ben Bernanke
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Sorry Mr. Bernanke: There Will be a Double-Dip Recession
Despite what U.S. Federal Reserve Chairman Ben S. Bernanke said in his speech at the International Monetary Conference yesterday (Tuesday), it looks very much like we're headed for a double-dip recession.
Indeed, the economic reports of the last week or so demonstrate that the U.S. job machine was never really jump-started after the Great Recession of 2008-09.
The upshot: The U.S. economic recovery is stalling, and we're almost certainly looking at a double-dip downturn.
Recessions are always painful - and double-dip recessions are even more so.
And this second "dip" may be more of the same - a bloody economic downturn that leads into a feeble recovery with unemployment spiking to even higher levels than we're currently seeing.
But there's a slight chance that this double-dip recession could prove quite productive for the U.S economy.
Let me explain.
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Treasury and Fed Put Out Cash, Raising Fist Pumping Crowd for Ben
The market waltzed through a week of heavy Treasury auction supply, but it did not have to pay the piper until Friday and Monday, May 2, when all the new paper was due to settle. Thursday's settlement actually saw bills paid down by $11 billion. That and $16 billion in POMO gave the markets plenty of juice for Ben's coming out party. The US Government, just like Colonel Kadaffy, sent out wads of cash to its minions to insure that cheering, fist pumping crowds would show up for Ben's appearance before the scripted, adoring mob of ink stained wretches. It was sickening. And I'm not even talking about the so called reporters in the room with him. I'm talking about the security market apparatus. Anyone who dared protest that the market show had gone too far was beaten to a pulp. Even venerable bear David Rosenberg of Gluskin Sheff was cowed into submission.
Friday and Monday the market has a big pile of new paper to settle. We have to wonder whether having spent every last penny they had in propping things up earlier in the week, the dealers have anything left come Monday. The markets "should" sell off, if not today, then Monday.
The indirect bid at the auctions continues to weaken, suggesting that foreign central bank (FCB) players continue to withdraw from the game, but the Fed's custodial data on FCB holdings went the other way, showing an explosion of FCB buying the prior week.
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Did Ben Bernanke Hint at QE3 During Historic Fed Press Conference?
While the first press conference ever held by U.S. Federal Reserve Chairman Ben Bernanke grabbed most of the headlines this afternoon (Wednesday), it was the post-meeting statement issued earlier in the day that grabbed my attention.
In particular, I zeroed in on the part about the policymaking Federal Open Market Committee (FOMC) regularly reviewing "the size and composition of its securities holdings in light of incoming information and is prepared to adjust those holdings as needed to best foster maximum employment and price stability."
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Is Bernanke Addicted to Cheap Money?
Money Morning's Chief Investment Strategist Keith Fitz-Gerald joins FoxBusiness' "Varney & Co." to discuss the reasoning behind and effects of U.S. Federal Reserve Chairman Ben S. Bernanke's easy money policies. Loading the player …
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How Bernanke Will Keep a Fire Lit Under Stocks Until Year End – And Which Sectors Will Soar
While many investors have solid reasons to remain concerned about the broader economic picture, there are some market sectors roaring forward that no one can afford to miss - and they will continue to provide profit opportunities thanks to the work of U.S. Federal Reserve Chairman Ben Bernanke.
Stocks rattled around in 295-point range of the Dow Jones Industrial Average over the past five days like pebbles in a maraca, but ended quietly -- a fraction above flat. The big-cap indexes have now posted six of their past seven closes within half a percent, hemmed in by some sort of spooky gravitational pull.
Earnings came in quite a bit better than expected for most major companies, as the cheap dollar has helped overseas sales for Caterpillar Inc. (NYSE: CAT) and McDonald's Corp (NYSE: MCD). Over in the exciting web content space, Netflix Inc. (Nasdaq: NFLX) wowed the crowd with outstanding third-quarter results, logging a sales increase of 31.0% and adding 1.9 million net new customers. That's a lot of new buyers in an economic environment that is supposed to be so terrible that the Federal Reserve thinks unprecedented medicine is required.
To read about how the Fed can keep stocks soaring, click here -
Question of the Week: Readers See Failures in Fed's Policies During U.S. Economic Recovery
The U.S. Federal Reserve last week said it would take a small "easing" step - what Fed watchers described as a largely symbolic move designed to show the central bank is "concerned" with the nation's economic outlook. The central bank's policymaking Federal Open Market Committee (FOMC) said it would hold interest rates at record-low levels and announced it would reinvest maturing mortgage-backed securities back into the market so that its balance sheet does not shrink.
However, Analysts think the Fed will have to do more to help the economy move along, and are expecting more announcements of policy easing in coming weeks.
"I suspect that the Fed will, within time, purchase more longer-dated government securities" than is required by reinvesting the principal payments from agency debt and agency mortgage-backed securities in the Fed's portfolio, said veteran Wall Street economist Henry Kaufman to Reuters.
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The Fed's Treasury Purchase Plan is Just Further Proof That It's in the Denial About the Dollar
This week's decision by the U.S. Federal Reserve to buy Treasuries in an effort to prop up borrowing is further proof that the economy is worse off than policymakers would have us believe. But more than that, the Fed's Treasury purchase plan is just one more reason for investors to anticipate inflation and take steps to protect their money from it.
In case you missed the news, here's what happened...
The Federal Reserve on Tuesday announced that instead of allowing proceeds from maturing mortgage bonds to disappear from its balance sheet, the central bank would take the "modest" step of using them to invest in new Treasuries.
In plain English, that means that the Fed is reinvesting into U.S. Treasuries the money it would otherwise bank from maturing mortgages.
Its goal is very simple: to keep long term interest rates from rising.
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An Anemic Economic Recovery Keeps the Fed From Focusing on Inflation
With interest rates near zero and a balance sheet that's in excess of $2 trillion, U.S. Federal Reserve Chairman Ben Bernanke would be very glad to offload some of the Fed's obligations. But so far he's has been unable to do so, as an anemic economic recovery continues to monopolize his attention.
The central bank yesterday (Tuesday) announced that it would reinvest the proceeds from expiring mortgage-backed securities into longer-term U.S. Treasuries. The move should help a weakening economy by keeping mortgage rates low. And while it also may boost inflationary pressures, the central bank feels it had little choice.
"Information received since the Federal Open Market Committee met in June indicates that the pace of recovery in output and employment has slowed in recent months," the Federal Open Market Committee said.
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Stocks Stuck in Trading Range Despite Positive Earnings Reports
Despite positive earnings reports last week from more than a few bellwether companies, stocks remain stuck in a trading range that continues to test investors' patience and skill.
Stocks launched higher last week in another round of the hyper-volatile action that has plagued the equity markets over the last three months. The good news is that some technical resistance was knocked out in the process, potentially setting the stage for a bigger rally in weeks to come.
The not-so-great reality: Stocks remain mired in the same range that has boxed them in for the past three months because, let's face it, despite their strong move they really only ended the week a fraction above where they started the previous week.
Read more about which stocks are leading the pack...
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Buy, Sell or Hold: A Copper-Price Rebound Could Mean a 50% Gain For Freeport McMoRan Copper & Gold Inc. (NYSE: FCX)
It's time to play "the metal of the economists"- copper. And that brings us to one stock: The publicly traded king of copper - Freeport McMoRan Copper & Gold Inc. (NYSE: FCX).
Let me explain ...
Last week, I provided a solid "defensive-investing" pick for readers who wanted to balance their portfolios - and wait for the latest global-financial storm to pass.
During the past week, we got very strong indications that strong hands see value in the market:
