Federal Reserve Chairman Ben Bernanke was subjected to journalists questions for the second time yesterday when he hosted the second post-FOMC press conference. As was expected going into the meeting, the Fed made no change to the Federal Funds rate or their plans to alter the second round of quantitative easing. This came as no surprise given the recent bout of bad economic numbers in nearly every sector.
Just as we began to have serious discussions regarding a Fed exit strategy, the economy gets hit with a series of very poor economic reports and we are hearing chatter about a double dip recession.
Today’s employment situation report showed growth in nonfarm payrolls of 54,000, about 120,000 fewer than were expected and that expectation was dropped this week due to other weak economic news. Namely Wednesday’s Institute For Supply Management’s (ISM) manufacturing index.
We sometimes get too busy to comment on some important issues as was the case with last month’s announcement that Standard & Poor’s revised its outlook on the long-term AAA rating of U.S. debt to negative from stable. It caused a stir especially from tea party folks and GOPers who only discovered the budget deficit recently.
What struck me most about the announcement was the source. Frankly, I can’t give much credence to any of the official ratings agencies who arguably are the most guilty entity in our current economic crisis. They are the ones that slapped AAA ratings on the toxic subprime assets behind the crisis and who had conflicts of interests with those that created those securities. Turns out their current analysis may not be much better. Jay Feuerstein talks about how they are off the mark in a recent op ed piece titled “S&P is dead wrong about U.S. debt.”
On a day that saw the Dow Jones Industrial Average reach its highest close since June 5 (nearly three years/see chart) and yet the sector which is most responsible for the Great Recession—housing—continues to exhibit weakness, all the talk is on tomorrow’s first ever Fed Chairman press conference following the Federal Open Market’s Committee (FOMC) meeting.
“The greatest tragedy would be to accept the refrain that no one could have seen this coming and thus nothing could have been done. If we accept this notion, it will happen again…. It falls to us to make different choices if we want different results.”
These are the words of the task force that wrote the Financial Crisis Inquiry Report released in January. These 10 commissioners were tasked by Congress to determine what caused the 2008 financial meltdown. After hearing about possible exemptions of certain firms from the Dodd-Frank Act by those in Congress, I read this report. It irks me that some of those responsible are the loudest naysayers of reform. Even the task force notes: “Some on Wall Street and in Washington with a stake in the status quo may be tempted to wipe from memory the events of this crisis….” So let’s have at it…what were the group’s main conclusions? (more…)
What happens when an irresistible force meets an immovable object? I am not sure but I think we may be facing this paradox as it relates to the markets and this week’s employment situation report. Most economic reports over the last month have indicated a soft economy and we hear more and more talk of a double dip recession. While a double dip recession is not likely, the consensus seems to be that we will run out of stimulus spending before the recovery begins in earnest. Yet equity markets have skyrocketed in July. The Dow is up more than 1,000 points since it hit a nine-month low following the release of the June employment report on July 2.
When searching for the press release for the June unemployment report form the Bureau of Labor Statistics I came across the White House blog from the Council of Economic Advisors.
Under the headlines: the Employment Situation In June, it stated, “Private nonfarm payroll employment increased by 83,000 in June and the unemployment rate fell two-tenths of a percentage point to 9.5%.”
There has been several analysts predicting that the U.S. economy is headed for a double dip recession, which is looking more likely with each economic report we see. Whether we officially fall into a double dip recession or not, the economy clearly is still struggling. The current economic crisis began with housing and if it is likely to also end with housing, that end does not appear anywhere in site.
Today the Dow Jones Industrial Average opened lower, coming within 50 points of the May 6 “flash crash” low. The S&P 500 actually took out its low from May 6 (see chart).
When examining what happened on May 6, I wrote a blog detailing all the bearish factors in the equities market. The point being that all these factors were sitting there like oily rags in a garage waiting for a match. The bears were claiming a major top was in place and the bulls knew a significant correction was coming before markets could once again rally. Once the market turned down, presumably due to what was going on in Europe, that scenario was in place. (more…)
It’s that time again, when all of the pundits and analysts weigh in with their predictions for the new year, and, as we leave “the aughts” behind, the new decade. The past two weeks have been chockablock with best of/worst of ’09 lists, events of the year, people of the year, etc. (Time magazine’s choice for Person of the Year for 2009, Fed Chairman Ben Bernanke, actually ties in very nicely with Futures’ January Markets piece, “Interest rate policy: Under pressure.”) The consensus among many pundits is that the coming decade HAS to be better than the one we’re leaving behind. (more…)
