Bernanke Bawks, Disappoints Hawks

The summer months might not bring much love to stocks, or Ben Bernanke for that matter.

His chance to turn into a pint-sized version of Paul Volcker has passed. Is Bernanke waiting to see how many times you can fill-up your SUV at the gas station with your tax refund? That would be four, which is the same number of reserve banks that submitted requests to lower the discount rate a quarter point. But there are at least two hawks on the Open Market Committee:

Dallas Fed President Richard Fisher and Philadelphia Fed President Charles Plosser were the opposing votes in the 8-2 decision to lower the federal funds rate a quarter percentage point to 2%. Both officials have voiced increasing concern about inflation. And both dissented at the March FOMC meeting....Mr. Fisher has had three opportunities to vote on the FOMC this year, and he has split from his colleagues each time. In a recent interview, he said he’s supported all of the Fed’s recent liquidity initiatives but questioned the usefulness of interest-rate cuts given continuing problems in credit markets. “It’s really a question of, are we getting the bang for the buck?” Mr. Fisher told The Wall Street Journal last week. “And clearly we’re not. The system was sputtering. And I began to feel that at 3.5%. After that, that’s when I dissented.”

Mr. Plosser, in a recent speech, voiced similar concerns about inflation and the effectiveness of rate cuts. “Monetary policy cannot solve all the problems the economy and financial system now face,” he said. “It cannot solve the bad debt problems in the mortgage market. It cannot re-price the risks of securities backed by subprime loans. It cannot solve the problems faced by those financial firms at risk of being given lower ratings by rating agencies because some of their assets are now worth much less than previously thought. The markets will have to solve these problems, as indeed they will. But it will take some time.” Economics Blog

It looks like homebuilding shorts can sit back and leave their trade on; retailing stocks can forget about busting a move and things could get a little boring as earnings season winds down. Louis Navellier is thinking that they are done, which is fine, but selling in May and going away looks better to me than getting fully invested, which he is now advocating.

We will need to see a backbone from Ben next time around, or he will lose the few fans he has, one of which includes yours truly.  Still, I am starting to get antsy. Thanks for taking armageddon off the table Ben, but what have you done for me lately?

Ben has been playing defense; but soon it will be time for him to go on the offensive attacking inflation.

Another Double Dissent: Dallas’s Fisher and Philadelphia’s Plosser
Economics Blog

Hey, Bernanke Bashers: His Moves Have Been the Right Ones
Barron’s

The Fed Crosses Its Fingers
Barron’s
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The content contained in this blog represents the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.

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