Subscribe for 12 months with recurring billing - $199

Buy 12 months of subscription time - $199

 

Search Gold Prices
Gold Price
[Most Recent Quotes from www.kitco.com]
Our RSS Feed

Gold Updates by Mail

Enter your email address:

Follow Us on Twitter
« Could Kinross Gold now become a takeover target? | Main | WHAT HAPPENED TO GOLD? – PART 2 »
Wednesday
Aug012012

Ben Bernanke Prepares More Punch, Holds Off Serving It

 

Grateful investors might confess that their punch bowl runneth over, thanks to the largesse of the Federal Reserve. After all, would the stock market have snapped back to pre-Lehman levels absent unprecedented zero-interest-rate policy, $2.3 trillion in quantitative easing, a scheme called Operation Twist, and Woodstockian amounts of dovish talk from chairman Ben Bernanke?

But with unemployment so high, the central bank is more than hinting that it needs to ladle out even more of the good juice to do its job.

Accordingly, the Federal Reserve on Wednesday stepped forward to say the economy has slowed, and it telegraphed that more stimulus—somehow, someway, we’ll get back to you on the particulars—is in the offing: “The committee will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.” U.S. equity markets barely moved on the news.

Only 12 percent of economists surveyed by Bloomberg News had predicted the FOMC would announce a new round of large-scale asset purchases, while 48 percent had predicted the announcement would come at the Fed’s Sept. 12-13 meeting. Between now and then, Bernanke & Co. can take in more unemployment data and react to how the European Central Bank moves to respond to Europe’s debt crisis. Bernanke’s counterpart there, Mario Draghi, sent markets rallying last week with his pledge to do “whatever it takes to preserve the euro.” Last month, the ECB took its main interest rate to 0.75 percent, a record low.

The Fed did say Wednesday it will continue Operation Twist via swapping north of a half-trillion dollars of short-term debt with longer-term securities to lengthen the average maturity of its holdings. It will also continue plowing back its maturing housing debt holdings into agency mortgage-backed securities. No surprise either that the central bank did not change its statement that economic conditions would likely warrant holding the benchmark Fed funds rate near zero “at least through late 2014.” (Also not surprising: Richmond Fed President Jeffrey Lacker dissented for thefifth straight meeting, saying he prefers to omit the 2014 time frame; he has said he expects that interest rates will need to go up next year.)

“It’s very important that we see sustained progress in the labor market and avoid deflation risk,” Bernanke testified last month.

Despite the lumpy economic news, equity investors have been giving shares the benefit of the doubt, with the S&P 500 index up nearly 10 percent this year. Corporate earnings are on track to break a record.

At least one outspoken market-watcher thinks investors are increasingly less hand-to-mouth beholden to Bernanke’s actions. “Don’t worry over what the Fed may do,” wrote James Paulsen of Wells Capital Management in a morning note to clients. “It may ease again or it may not, but the self-administered policy fix has already been implemented and it seems to be working!” Paulsen concedes that the while the pace of economic growth has indeed disappointed of late, the last several months have allowed the economy to “self-medicate” with lower mortgage rates, lower gas prices, and a significant decline in consumer price inflation. “If economic reports (even if they remain weak) continue to simply outpace lowered expectations,” he wrote, “investors won’t care much about what the Fed may do or the latest gyrations in the Euro zone because they will likely be too busy trying to get into a stock market before it runs higher!”

Fair enough. But the ultimate test of investor co-dependence with the Fed comes when the FOMC must finally announce an end to record easing—not more of it.

Have a good one!

Regarding www.skoptionstrading.com. We recently closed a trade involving the S&P which generated a profit of 25.61% and was opened just 8 days ago, the charts and stats have now been updated.

Our trading success rate is 91.00%

91 profitable trades out of 100.

Our model portfolio is up 455.14% since inception

An annualized return of 81.15%

Our annual performance figures are as follows:

2009 We made a profit of 23.89%

2010 We made a profit of 158.66%

2011 We made a profit of 40.95%

In 2011 we outperformed:

S&P by 42%

HUI by 53%

Gold by 31%

Silver by 41%


The 2011 Annual Report by be accessed via this link.

Also many thanks to those of you who have already joined us and for the very kind words that you sent us regarding the service so far, we hope that we can continue to put a smile on your faces.

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. Winners of the GoldDrivers Stock Picking Competition 2007  

If you are new to investment in the precious metals sector then you may wish to subscribe of our FREE newsletters regarding gold stockssilver stocks and uranium stocks, just click on the links and enter your email address.

PrintView Printer Friendly Version

EmailEmail Article to Friend

Reader Comments (1)

Paulson is a shill and an idiot to boot.

August 2, 2012 | Unregistered Commenterfallingman

PostPost a New Comment

Enter your information below to add a new comment.

My response is on my own website »
Author Email (optional):
Author URL (optional):
Post:
 
Some HTML allowed: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <code> <em> <i> <strike> <strong>