Monday, August 24, 2009

Billy Bernanke

Saint Bill of the grotto of the greenback has been beatified last week. That he performed the canonization on his own in Jackson Hole, Wyoming surrounded by some of the greatest scenery ever created gave it a certain holy gravitas. Herewith, the words of the rites.

“Our forecast is for moderate but positive growth going into next year. We think that by the spring, early next year, that as these credit problems resolve and, as we hope, the housing market begins to find a bottom, that the broader resiliency of the economy, which we are seeing in other areas outside of housing, will take control and will help the economy recover to a more reasonable growth pace.”

Ben Bernanke, Federal Reserve Chairman

The market cheered, the holders of short positions cringed, and the sun shone a little brighter. Wait, there must be a mistake. The keeper of the trillions said those words in 2007. Hmmm.....could it be he is plagiarizing himself. Considering those 2007 sentiments have to be among the least prescient ever uttered by a Fed Chairman maybe we should defer our accolades just a little longer.

I hope like everyone that he is right this time. But maybe first a prayer to Saint Anthony of Padua, the patron saint of lost items, soon to be declared patron saint of 401k's.

The consensus of economists now expect no recession next year. Unfortunately, the consensus has never accurately predicted a recession. So much for that comfort.

Given all the euphoria of last week, I have a feeling the animal spirits are nearing a neutering. It is always dangerous to reach a conclusion in the waning days of summer when junior traders practice and seasoned investors are on Martha's Vineyard or in the Hamptons, but things feel "toppy" and fundamentals no longer support broad valuations as they did in March.

John Barnyak