The Global Demographic Tailwind is getting lots of help from the FED. Is there any question now that Bernanke is targeting "asset values" and pushing a weaker dollar.
This from David Rosenberg today:
In the past, Bernanke discussed how useful the Fed’s communication skills can
be in terms of being a policy tool. One of the reasons why the Fed did not have
to resort to ‘shock and awe’ or target longer-term Treasuries is because all the
talk since late August had already produced the desired results. This is what
Bernanke had to say about it in today’s Washington Post:
“This approach eased financial conditions in the past and, so
far, looks to be effective again. Stock prices rose and long-term
interest rates fell when investors began to anticipate the most
recent action. Easier financial conditions will promote economic
growth. For example, lower mortgage rates will make housing
more affordable and allow more homeowners to refinance.
Lower corporate bond rates will encourage investment. And
higher stock prices will boost consumer wealth and help
increase confidence, which can also spur spending. Increased
spending will lead to higher incomes and profits that, in a
virtuous circle, will further support economic expansion.”
Notice how he mentioned the stock market twice — in just one paragraph. And,
as the legendary Dennis Gartman emphasizes in his commentary today, what
former Fed Governor Larry Meyer had to say yesterday on CNBC was very telling
indeed (“What happens over time to the equity market”). Asset prices have
always played a role in monetary policy and in the wealth effect on spending but
never as much as is the case today. And, just by talking the talk for the past two
months, the equity market has managed to rally 14% — creating $1.7 trillion of
incremental “paper” wealth without having to lift a finger (yet). Poof! Yes
indeed, for Dr. Bernanke, it is a case of the hand being quicker than the eye...
I can only surmise that the Fed had a view six-weeks ago that the economy
would be contracting by now and it clearly isn’t. Or that Bernanke would have
faced more dissents had he targeted the 10-year and above part of the Treasury
curve, which would have been far more stimulative. It is truly hard to believe
that targeting a part of the curve that is already yielding 1% is going to have
much of a macro effect. And, much of what happened was already priced in.
Perhaps the biggest news is that, as soft as it is, the U.S. economy is not falling
apart at the seams and that seems to be all the equity market needs to see to
grind higher. The two outcomes from yesterday that have some certainty
attached to are: (i) the steeper Treasury yield curve, which along with a GOP
controlled House, is positive for the financials that have been lagging, and; (ii) a
further weakening of the U.S. dollar (good for anything negatively correlated with
the greenback, from basic materials, to energy, to precious metals).
Bladerunner
Market Data 
Markets 
AI
