- Euro -- the Euro found a little love after the investors were left thinking that the Monti austerity programs were in trouble. Shoot, can you imaging that crazy Berlusconi coming very close to winning,? He's been in trouble for ever. In the mid '90s Berlusconi was getting in trouble. Italian bonds are mixed this morning, which I believe translates into investors haven't a clue about where the European Union (and Italy specifically) are headed.
- Bernanke strikes fear into the hearts of those who went short on Monday -- Helicopter Ben let everyone know in no uncertain terms that the Federal meeting minutes did not have his stamp of approval. The "fear" was all generated by a few Fed heads questioning quantitative easing. Dr. Bernanke said that the central bank's purchases are supporting the US economy with little risk of inflation or bubbles anywhere (including the stock market bonds, notes, or real-estate.) However:
- Bernanke 7/1/05 "We've never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don't think it's gonna drive the economy too far from its full employment path, though."
- Bernanke yesterday went on to stress he wants to insure that in the future none of the financial institutions will be considered "Too Big to Fail".
- The only question I would ask of Dr. Bernanke (and you gentle reader): What evidence exists that the Central Bank is doing anything to reduce our economy's dependence on Wall Street financial institutions? In fact, everything that we see published even by the most liberal news outlets is that Big banks are not lending. Then what happens to the money, Dr. Bernanke, that you are pumping into the "Big Banks"?
- Today the DOW is up 170+ points as I write, and the market is nearing the recovery of everything it lost Monday. Wild ride all over lip flapping. The markets definitely love what Bernanke had to say. Let's party like there is no tomorrow, because at some point someone has to pay off all this debt (or worse for the USA and the world - DEFAULT).
- SWISS FRANC -- currency investors (outside NY) did not like what was going on. Swiss Franc rose to a six week high vs. the Euro. This appreciation will have to stop, or the Swiss Bank will have to intervene in the currency again.
- Canadian $$$ -- loonie is up a bit today, but it got hammered when the price of Oil took a dip on USA Oil inventory report. Basically, any downturn in the Canadian $$$ is really due to the fear that the USA's recovery is not healthy or sustainable. BOC (bank of Canada) had signaled they may increase the rates this year, but the possibility of that happening are not very high. Mark Carney said yesterday that some of the downside risks to the Canadian economy are materializing.
- Brazilian Real - the Real is hanging onto gains. Unemployment rose in Brazil more than expected, but there are positive rate differentials with other countries that offset some volatility (and downside risk). Brazilian inflation is exceeding 4.5%, the banks target rate, and they may be forced to raise interest rates. Look for the what the Brazilian central bank does on interest rates next week.
Basically, all asset classes across the world are in a state of "chop", with a few exceptions in certain countries.
I leave you with two quotes:
"In the long run we're all dead" John Maynard Keynes
(No one seems to read Keynes book, and remember you spend to bring an economy to life, and you save surpluses during good times. The complementary aspect of Keynes' guidance was to raise taxes during upswings. What the USA has been doing results in increased spending in good times, and spend even more in downturns. Our illustrious leaders, [since President Nixon claimed he was Keynesian] have all followed (no exceptions even with President Reagan) the idea that the government backstop could not ever be exhausted. (Please read comment from Bernanke that housing never went down in value across the nation, because there is never an absolute in economies.)
"If pro is the opposite of con, then what is the opposite of PROGRESS?" - Paul Harvey
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