Friends
Reading the speech that Fed Chairman Bernanke delivered this morning in Jackson Hole, Wyoming, I was struck by the fact that not only does Dr. Bernanke believe that what the Fed has done has been beneficial, he is more than ready to do more if and when it is necessary. He speaks of traditional measures (which they ran short of years ago- lowering interest rates), and non-traditional measures (which includes various asset purchases) as the approaches the Fed has taken since 2007. He admits that the non-traditional approaches can lead to unintended consequences, but to date they have not, which encourages him to do more if necessary. To the contrary, Dr. Bernanke insists that the non-traditional measures have, indeed, been successful in keeping longer term interest rates down and buoying stock prices. He seems rather proud of that. Never mind, the economy for middle class Americans is wanting (I’m being polite here), and income for savers is non-existent. Anyway, the takeaway is, that there is what we call in the business a “Bernanke put” on the stock market. What that means is, if things get better on their own, stock prices should rise. If economic conditions deteriorate from here, then the Fed is ready to take additional non-traditional measures (more punch for the punch bowl) to make sure rates stay low and stocks don’t fall. Sounds like a can’t lose situation, right? Great, now I can sleep well this holiday weekend.
As for the markets, the Dow Jones Industrial Average was up 90 points to close the week and the month at 13,090. The S&P 500 was up 7 points to finish at 1406. Gold was up $37 to trade at $1695 per ounce, while oil was up $1.76 to trade at $96.38 per barrel WTI.
Next week we get a lot of news out of Europe and the August non-farm payroll number. In addition, volume should pick up some as vacationing traders and European leaders get back to work. The good news is that we can all enjoy our Labor Day weekend knowing that Dr. Bernanke has our back and is prepared to add punch to our punchbowl should it begin to run dry.
Have a great weekend everyone.
