This note was originally published at 8am on February 09, 2011. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.
“If you once forfeit the confidence of your fellow citizens, you can never regain their respect and esteem.”
In the same quote Lincoln went on to point out that while “it is true that you may fool all of the people some of the time… and “you can even fool some of the people all of the time”… “but you can’t fool all of the people all of the time.”
So how is The Ber-nank doing in Fooling The People of the United States of America that the inflation of the US stock market is good?
- Confidence – in the week that The Inflation he is playing for in US stocks was booming (SP500 +2.7% last week), the weekly ABC US Consumer Confidence reading got hammered down to -46 versus -41 in the week prior (those are minuses).
- Trust – in the latest boldprogressives.org poll, when asked “who do you think the Federal Reserve Chairman Ben Bernanke cares about more, Wall Street or Main Street?”, only 20% replied Main Street (even Geithner had a higher trust reading than Bernanke on that score).
- Invested Position – “91% of all equity holdings in the United States held by the top 20% income group in the country. The top 1% own 38% of all the equity valuation.” (from David Rosenberg and Zero Hedge yesterday).
Now if The People of America were as stupid about what’s in their wallets as the Fed must think they are, they’d be plowing through their snow covered driveways and barging through the doors at The Lehman Brother to open a brokerage account. Oh, wait – The Lehman Brother is gone – maybe that’s why Americans aren’t investing their confidence and trust in The Ber-nank’s inflation. Maybe it’s the snow and closed for business thing?
Whatever your opinion of the Incumbent 23rd Chairman of the Federal Reserve, odds are that if you are in the business of being long the inflation (stocks), after a +93.8% rally from the March 2009 low, you’ve got to be happy. I am.
But, to be crystal clear on this, you and I are not America - and neither is a humble looking central planner who thinks he knows exactly how this is all going to play out. Some Americans were fooled by that when the perma-bulls were cheering Bernanke on to provide the “shock and awe” of interest rate cuts in late 2007 and early 2008. But you can’t fool all of America again on this Mr. Bernanke – not this time.
Sadly, at the end of the day this is all about storytelling and the worst part about the marketing message behind the Austrian versus Keynesian economic views right now is probably that Ron Paul is the one delivering the commercials. He’s much better in print than he is on TV. What Americans really need is Robert Rubin to massage this concept of how debauching the US Dollar perpetuates American unemployment.
Unfortunately, Robert Rubin isn’t for hire anymore. Last I heard he is living large and licking his Doritos fingers, forgetting that he didn’t foresee another sovereign debt default cycle pending.
Back to Fooling The People…
In a recent survey from Selzer and Co., 7 out of 10 respondents said “the US is deliberately keeping the dollar low against other currencies, while only 1 in 4 think it’s letting the market decide the value of the greenback.”
I get it. The world’s largest bond fund manager gets it (see Bill Gross’ latest monthly letter). The American People get it. The Chinese get it. And now, even 2 of The Ber-nank’s Federal Reserve Presidents came out yesterday to remind the land of the living that they get it!
Yesterday, Federal Reserve Bank of Richmond President Jeffrey Lacker and Federal Reserve Bank of Dallas President Richard Fisher came out explicitly acknowledging both The Inflation trends in the global economic system and the need for the independent Federal Reserve to address it.
“I will be at the forefront of the effort to trim back our Treasury holdings and tighten monetary policy at the earliest sign of inflationary pressures are moving beyond the commodity markets and into the general price stream.”
Well done, Mr. Fisher.
What’s most important about these dissenting Fed Head comments is the timing. Today, The Ber-nank is going to testify in front of the Congress that what is scaring the living daylights out of the US bond market (inflation) is wrong and that he, our Almighty Central Planner, is right.
This isn’t a centrally planned Russia folks. This is America - and the next person who tells you our red, white, and blue free-market is what it used to be needs to go back and re-read the Constitution. As Steve Hanke states most succinctly, “the Constitution was designed to govern the government, not the people.”
Before you listen to Bernanke’s politicized view this morning, let me leave you with three Austrian economic thoughts (paraphrasing von Mises), because Ron Paul is going to have two thought leaders from this school lay down the opposite side of the Keynesian case today at the sub-committee meeting on Domestic Monetary Policy (that Bernanke won’t attend) in Washington, DC:
- Controlling Prices - “The metaphorical expression “price level” must never be used… with prices there is no such thing as a “level”… prices do not change at to the same extent at the same time” … as a central planner promises.
- Inflation’s Social Stratification - “When inflation starts, different groups within the population are affected by this inflation in different ways. Those groups who get the money first gain a temporary benefit.”
- Devaluation of a Currency - “If one devalues the currency and the workers are not clever enough to realize it, they will not offer resistance against a drop in real wages, as long as nominal wage rates remain the same.”
Sorry, Mr. Bernanke. Apparently America’s Main Street workers are clever enough. America’s small business owners aren’t hiring because they get this too. Best of luck out there in the Twitter-sphere and YouTube channels of modern day transparency in continuing to fool some of the people from here on in – the 60 Minutes gig isn’t working.
My immediate-term support and resistance lines for the SP500 are now 1303 and 1332, respectively. God Bless America.
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer