Rally Continues on Bernanke Comments


Markets up smartly on the heels of Bernanke’s speech last night. The panic had become palpable, leading to dovish comments from Bernanke and Kohn. Thus, as we discussed on Monday and Tuesday, the Christmas Rally has finally arrived. (Kudos to Guy Ortmann, Howard Lindzon, and Mike Panzner, who all pretty much nailed this one)

You should read Bernanke’s full speech (here), but the money quote is below:

"The incoming data on economic activity and prices will help to shape the
Committee’s outlook for the economy; however, the outlook has also been
importantly affected over the past month by renewed turbulence in financial
markets, which has partially reversed the improvement that occurred in September
and October. Investors have focused on continued credit losses and write-downs
across a number of financial institutions, prompted in many cases by
credit-rating agencies’ downgrades of securities backed by residential
mortgages. The fresh wave of investor concern has contributed in recent weeks to
a decline in equity values, a widening of risk spreads for many credit products
(not only those related to housing), and increased short-term funding pressures.
These developments have resulted in a further tightening in financial
conditions, which has the potential to impose additional restraint on activity
in housing markets and in other credit-sensitive sectors. Needless to say, the
Federal Reserve is following the evolution of financial conditions carefully,
with particular attention to the question of how strains in financial markets
might affect the broader economy."

Careful out there. We may get snow this weekend!


National and regional economic overview
At the presentation of the Charlotte Chamber of Commerce, NC
Board of Governors of Federal Reserve, November 29, 2007

Category: Credit, Economy, Federal Reserve, Inflation, Psychology

New Home Sales Rebound! (Sales drop 23.5%; Prices fell 13%)

Category: Data Analysis, Economy, Real Estate

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Category: Credit, Derivatives, Finance, Financial Press, Technical Analysis

No Conspiracy Theory — Just Data

Category: Data Analysis, Psychology, Taxes and Policy

GDP=4.9% (also, I have a bridge for sale in Brooklyn)

Category: Consumer Spending, Data Analysis, Economy, Inflation, Psychology

Inflation? What Inflation?

A tale of two headlines:

Inflation Fears Hit Eurozone


Goldman Sees Funds Rate Cut to 3%

Won’t someone please explain this to me?

How is it possible that the regions of the world with strong currencies — like Europe, U.K., Australia, and Canada — are having inflation problems. And yet at the same time, the nation having a record low currency — i.e., the United States and our Dollar — doesn’t seem to either inflationary pressures (At least according to official CPI data). And we seem to have little concern about further currency induced price increases.

Am I the only person who finds this incongruent?

If Goldman Sachs is correct, and the Fed does eventually cut rates to 3% — what might that mean for various dollar priced commodities like Oil & Gold?

Probably very little — if (and this is a big IF) we are in the throes of a recession. But what if the Bulls are right, and this is merely a mild mid cycle correction?

A 3% Fed rate could mean Oil at $150 and Gold at $1200.

Excerpts after the jump . . .



Inflation fears hit eurozone

By Ralph Atkins in Frankfurt and Krishna Guha in Washington
FT, November 27 2007 18:02


Goldman Sees Funds Rate Cut to 3%
Greg Ip
WSJ, November 27, 2007, 9:26 am


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