Waiting for Bernanke ‘the Man’

The main event this week is the speech from Ben Bernanke. In the US on Wednesday and Thursday, Ben Bernanke delivers his semi-annual testimony to Congress, which we think is some sort of report card on the US economy and a chance for congressman to ask inane questions about the Fed’s handling of the economic situation.

But Markets will probably be subdued until the high priest of monetary matters gives us his thoughts on all things money related on Wednesday and Thursday.

Last week, Dan wrote how financial markets resemble a drug addict. That’s exactly what they are. And now, we’re waiting for the man to speak. It’s an apt phrase. ‘Waiting for the Man’ is a classic song written by the Velvet Underground. Lou Reed was the lead singer, and he was addicted to heroin. The song is about his trek up to Harlem in New York City to wait for his man to deliver the goodies.

‘Hey, white boy, what you doin’ uptown?
Hey, white boy, you chasin’ our women around?
Oh pardon me sir, it’s the furthest from my mind
I’m just lookin’ for a dear, dear friend of mine
I’m waiting for my man’

And so, once again, financial markets wait on the man, Ben Bernanke, to see whether he’ll give a ‘sweet taste’ later this week.

He provided a nice little shot last week and now markets will expect confirmation of that rhetoric. But here is the problem. Consistent rhetoric has eluded the Fed over the past few months. There is disagreement amongst the voting members of the Federal Reserve Board. Some want to end QE soon while others want to keep it going.

Bernanke, in trying to present these views to the market, has finally revealed the Fed as a conflicted, clueless organisation. Bernanke doesn’t have the power of ‘the man’. Because if he doesn’t give the market what they want, the ‘market’ will come and tear his house down.

So he’s in an apparent position of dominance, but really he’s a pawn. He’ll either blow markets up or send them melting up.

The bottom line is that once conventional interest rates hit 0%, your only option to ease further is to engage in QE. But Bernanke is now trying to tell the market that ending QE is not really tightening, and that interest rates will stay low for an extended period.

The market knows better. QE is easing. That it’s not working is beside the point. Take it away and the market will feel pain.

Bernanke and the Fed have gotten us all into an almighty mess. They’ve screwed savers, rewarded speculators, and made a mockery of the investment process. Earnings and fundamentals are now secondary to the words of a non-elected academic who will soon comfortably toddle back to his books and theories.

And we’ll be left to clean up the mess…


Greg Canavan+
for Markets and Money Australia

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From the Archives…

The Agonists and the Ecstasy of the Financial Market
12-07-13 – Dan Denning

A Two-Faced Shock for the Australian Economy
11-07-13 – Dan Denning

Asiana Boeing 777: Lifesaving Defence-Tech ‘Miracle Materials’ in Action
10-07-13 ­– Byron King

Interest Rates: Something Wicked This Way Comes
9-07-13 – Bill Bonner

The End of a Share Market Correction… or the Beginning?
8-07-13 – Dan Denning

Greg Canavan
Greg Canavan is a contributing Editor of Markets and Money and is the foremost authority for retail investors on value investing in Australia. He is a former head of Australasian Research for an Australian asset-management group and has been a regular guest on CNBC, Sky Business’s The Perrett Report and Lateline Business. Greg is also the editor of Crisis & Opportunity, an investment publication designed to help investors profit from companies and stocks that are undervalued on the market. To follow Greg's financial world view more closely you can subscribe to Markets and Money for free here. If you’re already a Markets and Money subscriber, then we recommend you also join him on Google+. It's where he shares investment research, commentary and ideas that he can't always fit into his regular Markets and Money emails. For more on Greg go here.

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2 Comments on "Waiting for Bernanke ‘the Man’"

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slewie the pi-rat

you know how i feel compassion for the poor bernankster.
HIS scotch tape and HIS bailing wire keep MY checks in the mail…
~~||FiatRus Non Interruptus||~~

you know how our beloved chairSatan likes to tank the PMs when approaching a microphone and camera?
my friend deToke deVille sez: “…prepare to get your bottoms tested! …and to BUY!”

slewie the pi-rat

i think that should be “baling wire”…

but, he is also ‘bailing’…
L0L! …in more ways than one.

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