“Although important problems certainly exist, the growth fundamentals of the United States do not appear to have been permanently alerted by the shocks of the last four years. It may take some time, but we can reasonably expect to see a return to growth rates and employment levels consistent with those underlying fundamentals.” -Ben Bernanke, August 26, 2011
“The Great Bernanke”: This is the name my partner Rob McCreary has been using for our Federal Reserve Chairman. Visions of a man behind a curtain pulling levers and blowing smoke come to mind. The “Great One” did not offer any specific policy items, but indicated that the Fed has numerous tools to provide stimulus if needed to maintain growth. The September Fed meeting was extended a day, to discuss these actions. It seems that his lack of any urgent comments calmed some nerves as equities rallied shortly after the speech was released. Interestingly, gold was also up, which is counter to the recent trend of stocks up, gold down and vice versa.
TED Spread: A measure that some investors use to gauge risk in the financial system (however you define that) is the spread between the 3 month London interbank offered rate (LIBOR) and the 3 month T-bill. Someone pointed out the recent spike in the spread as can be seen below in the chart on top which is one year. The four year chart is on the bottom and shows what a spike really looks like! Notice on the bottom chart that during last summer’s correction the spread moved up to nearly 49.
Irene: I have very fond thoughts when I hear the name Irene, as it is the name of my late mother-in-law. It reminds me of the times when she would be upset and seemed like a small hurricane. A much bigger version is heading for the Northeast U.S. seaboard and NYC is in its sights. I don’t recall the last time NYC was being partially evacuated for a storm.
Market Today: The market started out weak, seemingly waiting for Bernanke’s speech. After the non-event of his speech, stocks rallied strongly for most of the day until a late pull back. The strongest sectors where tech, industrials and materials. Laggards included utilities and financials.
High school football starts in our area this weekend and my home town team, Brecksville, has a decent team this year, so it should be fun to watch the team’s progress. They are led at QB by the son of a former NFL and Ohio State University QB/punter, who led our high school to its only state championship in 1983. Can you name him? Former graduates are not eligible.
Have a nice weekend and enjoy the nice weather, if you have some.
Edward R. Matuszak
