Last summer, the Bernanke put had a strike range in the 1020-1050 SPX range. From what’s been seen in actual economic growth when it officially started in Nov was that it was of no help. It certainly though helped asset prices as stocks rose 30% and credit spreads tightened dramatically. We’ve now seen the wreckage that followed after it ended on June 30th, the entire QE2 equity rally has almost reversed. Here lies the fallacy with any short term stimulus, either monetary or fiscal. At some point it has to end and then we revert back to where we were with then a bill to pay either thru higher taxes or from the eventual exit of policy. The only thing that changes economic behavior in a substantive way is policy that has a long term view, not something that will end in 6-12 months. Rest assured though, the Fed doesn’t realize this (US Govt doesn’t either) and Bernanke will prep the market today for something at 2:15 although the law of diminishing returns is in full effect. China’s July CPI rose 6.5% y/o/y, a touch above expectations of 6.4% but is the fastest pace since June ’08. Industrial Production and Retail Sales rose slightly less than expected. The Shanghai index was the lone bright spot, closing unchanged and copper is bouncing back. An aside, as we’ve seen over the past week, an oversold market can just get more dramatically oversold but look at the German DAX on how extreme we’ve gotten. The 7 day RSI in the DAX is at 4.2 which compares to 5.2 in the SPX the day of the 1987 stock market crash.

Category: MacroNotes

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

5 Responses to “Where is the Bernanke put now?”

  1. franklin411 says:

    2/3 of the gov’t understands that long term investment is needed to restore our competitiveness. It’s only your tea party folks who disagree. They got us in this mess, and they’re determined to keep us here by threatening to detonate the C-4 strapped to their chests until we agree to their demands.

  2. Chief Tomahawk says:

    Japan stepped in overnight to buy stocks and reversed the Asian market selloff.

  3. Mike in Nola says:

    @F411: As someone who’s been a Dem almost twice as long as you’ve been alive, I disagree. The Big O mostly gave us short term stimulus. Despite all the talk about “shovel ready projects,” much of the stimulus just went to keep local governments afloat. Not that that wasn’t needed, but it wasn’t going to produce anything long term.

  4. FS says:

    @F411 As someone who is a Dem and a tea party sympathist, I totally disagree. 2/3 of the government should be eliminated so we can make long term investments. Unemployment benefits are not jobs, hand outs (corporate OR individual) weaken our country, and the lack of responsibility coming from Mr. Obama is at the heart of why he should resign.

  5. Greg0658 says:

    “shovel ready projects” .. I made a presentation in my real on the street picture window .. but no one called and said lets put some paper together – together and submit it .. so the 4 corners & highway is getting the ditch dugout wider and the corner some turning lanes .. and the linesmen both above & below ground get lots of work .. to bad the antique hanging on the wall with the dangling cord is about to get the heave ho … I’m so sorry – its all my fault – no dirt digging dreams in my mind anymore
    Glen Campbell – Wichita Lineman (Vinyl)