Bernanke’s “On the Other Hand” Speech

To the disappointment of many on Wall Street, and to the relief of many in the real world, the Federal Reserve Board did not announce a third quantitative easing program (QE3) today.

But Fed Chairman Ben Bernanke did not rule out a QE3 in the future.

Op-ed writers and politicians are often criticized for taking an “on the other hand” approach, in which they combine criticism and praise in the same commentary or speech.  Of course, Mr. Bernanke is not an op-ed writer, but his highly anticipated Jackson Hole speech today would certainly qualify as an “on the other hand” speech.  Both supporters and opponents of ongoing monetary easing could find plenty to like – and plenty to dislike – in what he had to say. read more

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The Fed and Facebook

On the surface, The Federal Reserve Board and Facebook have nothing in common.

But media speculation about Fed action is very similar to the speculation that preceded Facebook’s IPO.

For a year or so before the IPO, it seemed that every business reporter was writing about when Facebook’s IPO would take place.  While some of the better journalists talked to analysts who questioned the company’s valuation, there was also a great deal of hype about the impact Facebook’s IPO was going to have on the economy and on the environment for IPOs. read more

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Stock Rally Built On Wishful Thinking

“This is the most disrespected rally I’ve ever seen.”

John Buckingham, Al Frank Asset Management

Stock prices have rallied and are closing in on their highest level in five years.  After six consecutive weeks of gains, the Dow Jones Industrial Average is up 9.7% since early June.

Any increase in stock prices is, of course, good news.  But the market rally has little to do with market fundamentals.  It’s not due to improved corporate earnings, higher employment or other economic news.

The market has been rallying based on the belief that The Federal Reserve Board will approve another round of quantitative easing. read more

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Is Everybody Happy?

Forget about growth in GDP, the unemployment rate, inflation, stock prices and all things relevant to money.

Federal reserve Chairman Ben Bernanke suggested this week that happiness should be used to measure the country’s economic strength.

According to Bernanke, economics isn’t just about money, it’s also about understanding and promoting “the enhancement of well-being.”  We’re not sure how or whether “well-being” can be enhanced, but it’s probably a good thing that measuring happiness is about as feasible as measuring a person’s thoughts. read more

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French Tax Policy: One For You, Three For Me

French President Francois Hollande’s proposal to take three quarters of the money earned by France’s wealthiest earners is bound to create an economic boost – for Belgium, Germany and other European countries.

The number of high earners in France is low, so the tax will not raise significant revenue, but it very likely will drive many wealthy taxpayers to relocate in other countries with lower rates.  Even many young professionals with the potential to become more successful will likely relocate, according to blogger Mike “Mish” Shedlock, an advisor with SitkaPacific Capital Management. read more

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Dog Days Not So Slow

Another near-miss “flash crash,” more European craziness, buzz about more action from The Federal Reserve Board and a stock market that rises along with the unemployment rate … who says things slow down during the summer?

Goodnight, Knight?

Whenever a terrorist is caught, it’s natural to have a queasy feeling and wonder what would have happened if the terrorist had not been caught.  Worse still is the fear that maybe the next terrorist will succeed.

Knight Trading’s runaway algorithm last week caused a similar reaction.  Wednesday opened with heavy trading in 150 stocks.  Fortunately, the glitch was traced to a rogue algorithm fairly quickly (but not quickly enough).  Such algorithms are programmed to buy or sell stocks based on certain criteria.  The rogue acted more like a day trader than a Knight trader. read more

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