Fumbling, Bumbling, Bungling Bernanke
Friday, January 11, 2008 | Teeka TiwariRating:
Wow, what a ride! We have chairman Bernanke’s statement to thank for yesterday’s volatility. Let me be clear, I am not a fan of this new Fed Chairman.
The chairman of the Fed has to project a clear message to the Street. This guy has failed in that job miserably. One week he’s concerned about inflation, another week he’s concerned about growth. It’s this confused message that has the market seesawing all over the place.
This week's message from the Fed is that growth may be imperiled due to a weak housing market and slackening job growth, and so more rate cuts may be on the way.
DUH!
Where have you been, Mr. Chairman?? I read the Chairman’s speech; it was a treatise on the obvious and the old. A common criticism of this new Chairman is that he has consistently been behind the issues instead of in front of them. I’ve tried to give him a pass, but enough is enough, already. Either lead or quit, but stop this waffling, middle of the road nonsense. It's killing investor sentiment.
This isn’t some kind of abstract academic experiment; this is the real world, Mr. Chairman. Please, for the love of Pete, WAKE UP!
We had that genius, Plosser, from the Philly Fed come out last week spouting off about how the Fed doesn’t need to cut. Well, when you’re deeply ensconced in the loving arms of huge personal wealth, it’s easy to be so sanguine. But what are the rest of America’s 299 million people who are not millionaires supposed to do???
If we are going to avoid a protracted and painful housing-led recession, we need to see rapid rate cuts along with massive fiscal stimulus. (Read TAX CUTS!) If we’ve read Chairman Bernanke right, it appears that we will be getting the rate cuts, but where’s our fearless leader, President Bush, in all of this? He’s made some speeches, but WHERES THE BEEF? This President is sitting in a daze, just like he did after 9/11 and Katrina.
Americans are in deep financial trouble and need help now. Tax cuts and tax credits will incentivize private businesses to start hiring again and will keep consumers spending. Make no mistake, it’s that spending that keeps this country going.
The financial elite keep telling us not to read too much into last week’s job report.
ARE YOU KIDDING ME??
We had negative private sector job growth! Do you know how bad things have to be for no net new private sector jobs to be added in the entire country? Bad; really, really bad. Corporate America is running scared right now; expansion plans are getting shelved, new construction projects are being postponed, and jobs are getting cut.
This will turn into a vicious self-feeding downward spiral if we do not see swift and decisive policy shifts. If the President wants to hand the country to the Democrats come November, then he’s going the right way about it.
OK, rant over.
Every now and then I log on over at www.TickerHound.com and answer questions asked by everyday investors like yourselves. I don’t get to answer as many as I’d like to because of my schedule, but I wanted to answer a few of them in this week’s column.
Q. Do you think current oil bubble is similar to housing bubble?
A. Oil is not experiencing bubble valuations…yet. At some point, oil prices will go through a bubble stage but we are a long way off from that occurring. Over the next 2-5 years, we can see oil trade north of $150 a barrel. Remember that it is the explosion of China’s and India’s middle class wealth matched with years of underinvestment in new oil exploration that is propelling oil prices higher.
Q. Is it time to sell my Gold? I've owned gold since it was in the mid 500's...I think it was up 33% in 2007 alone. Is now the time to sell or should I sit tight and wait for more rate cuts?
A. I can’t advise you directly, but what I can say is that I believe that the US Dollar will continue to weaken; I believe that rates are going down, and I believe that inflation will worsen. Each of these events is extremely bullish for gold prices. I leave you to draw your own conclusions!
Q. What do you think about Starbucks (SBUX)? Howard Schultz is back. Everybody likes coffee. It's cheap. What can go wrong?
A. Actually quite a bit. Dairy prices, sugar prices and coffee prices are all moving higher. McDonalds, Dunkin' Donuts and a host of other competitors are finally getting in on the specialty coffee kick and are taking a bite out of their market share. Now, with all that said, at the right price, I would be a buyer of Starbucks. If I saw the PE (Price earnings ratio) drop off to the 15 x earnings level, I would probably step in. They still have a fantastic global franchise, but while commodity prices are on the rise, their growth rate looks to be more muted than in previous years.
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“Let the Game Come to You.”
Teeka Tiwari
Chief Investment Officer
Point & Profit
