Wednesday, November 20, 2013


Sorry about the past few days.  I had a bit of an eye problem related to drops during an exam and couldn't see a damn.  Over Here, the political scene is dominated by ObamaCare…oops, The Leader has mandated that it can no longer be called that as of course he had nothing to do with it so all comments are to be referred to as the Affordable Care Act or, "ACA," which is morphing into Less Affordable Care by the minute.  On the financial front, the Red continues to excite.

As expected, Ms. Yellen's confirmation as Chairman is now a certainty as she received the endorsement today of a key Republican Senator--as it should be I might add as there is certainly nothing in her record which cries out for a rejection.  Having settled that, all other things about this organization remain a mystery.

One might remember that when nominated, Mr. Bernanke promised a far more transparent Fed which at the time I expressed a belief that that may not necessarily be a good thing.  Whether it is or not the transparency issue seems to have transformed itself into the belief that any governor can say any thing about anything whether it in concordance with stated policy or not which causes a God-awful confusion among the self-involved resulting in all sorts of weird and wonderful reactions in the capital markets.  For example…

Last week, Ms Yellen made it quite clear that QE III was not a target for tapering any time soon and that the easy money policy would continue for a while…or so ever one thought.  The markets swooned and this wonderful piece of good news.  On Monday, however, Mr. Bernanke modified that a bit by being not so firm on the lack of future tapering but continued to express the almost certainty of easy money.  The markets stopped to think for a brief moment but deciding that "easy" was the operative word, continued onward.  Then came today with the release of the latest minutes along with a couple of Fed interviewees that indicated tapering might just be around the corner given the strength of the economy which could well be followed by a rise in interest rates in 2014.  WELL!  Smack me upside the head why don't cha!  The DOW dropped like a stone and interest rates moved quickly upward.  It would all be a lot easier if this gang locked itself away in a room somewhere in a real-life city other than Washington and decided who was going to be their spokesman, but it looks like the paste is truly out of the tube and there's a  real chance that there will be fist fights as to who gets in front of the cameras first---Memo to Govs:  if Chuck Schumer is in the same room don't try it.  Bodily harm could result.

Lost of course is the real conversation behind all of this like why in the hell should we have QE (pick a number) at all, as three years it has proved to be all but useless as an economic tool although it does buy paper that for a long time nobody else would touch with a stick, but what is now perhaps the catalyst to another near-catastrophe as once-ended, the market will expect the Fed to turn from a $4 trillion whatever into something resembling sanity overnight. As for me…well, I can see again even if what is out there is pretty ugly.

1 comment:

  1. Excellent post: one quibble: impossible to say this as we don't have the counter-factual (or actually the economists will say we do - 1930-32):
    QE (pick a number) at all, as three years it has proved to be all but useless as an economic tool

    BTW: can you drop change your captcha comment stuff - pretty much impossible to comment