Inflation picks up, thanks Ben

[Hyperion]

The CPI, as expected, increased in January by 0.4% while the core CPI rose by 0.3% and the only thing that comes to mind is…thank you Ben…and ...Housing is...well...housing…

Year-on year the CPI stands at 4.3% and the core CPI increased to 2.5%, which was the fourth consecutive increase in core inflation (The Fed doesn’t like to use headline inflation because they apparently live in a world where humans do not consume food and energy while to the rest of the population those two expenses may have the biggest impact on a daily base).

Of course he is not the sole reason why inflation will continue to post potential problems for consumers and the economy but he made sure that he delivered his part (things could turn worse as the rate-cuts will filter through to the economy).

Is it a surprise that inflation accelerated?

Not at all since different indicators screamed for an up-tick.

Yes, I forgot, the Fed thought that inflation would be kept under control but Bernanke also backs the ‘economic stimulus package’ and thinks that two plus two equals three so what else did you expect?

Don’t forget that he is extremely incompetent and has no experience at all when it comes to business and the economy. The only thing he can use to make monetary decisions is his more than outdated theoretical economical models which simply…do not work in reality.

What is even worse than the pick-up in inflation is that thanks to ‘Septic Tank’ Ben inflation is heavily embedded into the economic pipeline and every attempt to bring down those expectations is countered by Ben with a move that is less than sophisticated.

It is really terrible if you have a person who is in charge of something but has no clue whatsoever about how to manage the task but what is even worse is a person who has no idea but thinks that he has all the knowledge and skills necessary to succeed. Yes, it is funny but it really has a negative effect on the economy.

I know that if I have said it once I have said it a thousand times:

The harder you push to fight the markets the harder they will push back and the harder you push the economy the harder the economy will push back.

The CPI will definitely attract the attention of the Fed but don’t we just wish it would not because now you can expect more dumb things to happen. Bernanke, who hates the economy for one reason or the other, acts like a boxer who did not hear the bell and just continues to throw punches at the economy and the consumer.

Where is the referee?

[BadThad]

And now he'll lower the rate again....guess what that will do? LOL

Hey, look at IAU, gold is the key here, I'm loving this ETF. I also took the liberty of buying a couple oz's of gold a month ago. Great investment IMO.

[Hyperion]

Oh yes, Ben can lowere rates another 300 basis points and than maybe the Fed will mail out rebate checks...

Maybe Helicopter Ben will print a $12 bill with his face on it.

Why?

Why not...its 'Septic Tank' Ben...

I don't think that your gold investment has dissapointed you since you decided to add it to your portfolio......I don't invest in ETFs so I can't really comment on that.

[Evil-Eye]

So what do you say should have been done? And how would that have solved the illiquidity problem?

[Hyperion]

Absolutely nothing. The Fed should have worried about inflation. Period. The markets will take care of all the problems. Markets work best without any interference. They did not need any help to create the great business environment and they don't need any help.

Those who scream for help do not deserve it. The economy moves in cycles...expand and collapse. The more you interfere the more you add to the problems but delay them.

If a 300 basis point drop in interest rates will have such a hge impact on a in respect to loans you should not take out a loan in the first place. Ben lowers rates to encourage borrowing (which is not really what we need right now...if anything encourage saving due to huge debt loads) but at the same time pushes costs higher and higher. He just lacks the knowledge about the economy.

The economy begs for a recession and the markets really need a bear market so let them have it, it will be a good thing.

The markets reward companies who knew how to run a business and punish those who did not.

[Theboundbook]

Originally Posted by Hyperion

Absolutely nothing. The Fed should have worried about inflation. Period. The markets will take care of all the problems. Markets work best without any interference. They did not need any help to create the great business environment and they don't need any help.

Those who scream for help do not deserve it. The economy moves in cycles...expand and collapse. The more you interfere the more you add to the problems but delay them.

If a 300 basis point drop in interest rates will have such a hge impact on a in respect to loans you should not take out a loan in the first place. Ben lowers rates to encourage borrowing (which is not really what we need right now...if anything encourage saving due to huge debt loads) but at the same time pushes costs higher and higher. He just lacks the knowledge about the economy.

The economy begs for a recession and the markets really need a bear market so let them have it, it will be a good thing.

The markets reward companies who knew how to run a business and punish those who did not.

You took the words right out of my mouth.

[Evil-Eye]

Originally Posted by Hyperion

Absolutely nothing. The Fed should have worried about inflation. Period. The markets will take care of all the problems. Markets work best without any interference. They did not need any help to create the great business environment and they don't need any help.

Those who scream for help do not deserve it. The economy moves in cycles...expand and collapse. The more you interfere the more you add to the problems but delay them.

If a 300 basis point drop in interest rates will have such a hge impact on a in respect to loans you should not take out a loan in the first place. Ben lowers rates to encourage borrowing (which is not really what we need right now...if anything encourage saving due to huge debt loads) but at the same time pushes costs higher and higher. He just lacks the knowledge about the economy.

The economy begs for a recession and the markets really need a bear market so let them have it, it will be a good thing.

The markets reward companies who knew how to run a business and punish those who did not.

How did the the credit market take care of itself? It dried up and vanished. How would it resolved itself?

[Skydaemon]

Originally Posted by Evil-Eye

How did the the credit market take care of itself? It dried up and vanished. How would it resolved itself?

Easy. The credit market problems are basically a lack of trust.

Insurers hurry up and either go bankrupt or find full capital to support their losses.

Banks belly up to the bar and put ALL the losses on their balance sheets and own up to them including the losses backed by bankrupt insurers. If certain banks need to go bankrupt then that needs to happen too.

AFTER all that happens then trust issues get resolved and the credit market starts to open again. There really is no other way it's going to start up again regardless of what the fed wants.

As long as the banks are sitting there going "we wrote of $10 billion this quarter, and we're still hiding an undisclosed amount which is obviously big enough for us to need to hide" the credit problems will continue if not expand.

I swear they're making a mockery of financial reporting requirements with this nonsense. When every person in the world knows they're hiding huge losses and they won't own up to it on their financial reports, or pretend to "discover" more every month, regulatory agencies and auditors are failing in their duties to investors and the financial markets in general.

If they try really hard they can drag this process out for years and take down other business that rely on peripheral credit or consumers spending though. Apparently the student loan credit market is coming up to the chopping block soon and who knows what else. Housing won't recover until credit does either. Right now it's looking like 2 more years of falling housing prices the way things are dragging on. I expect fannie/freddie mac are going to be near collapse, requring huge federal bailouts themselves before this is over.

Bear markets are not bad. They're necessary and valuable. Everybody knows what the answer is, they just don't like it because it doesn't mesh with their feel-good everybody-is-a-winner-all-the-time outlook on life.

There are companies that have bankrupcy owed to them, and that needs to, and should happen. If the government wants to get the markets bottoming, then step in and kill those companies that need killing. Or at least force them to declare themselves fully and let the market take out the trash.

The government could also tell the accounting firms that if it isn't fully declared on the books by the next quarterly report their firms will be personally liable for any misrepresentations. That should get them doing their jobs.

[Evil-Eye]

Originally Posted by Skydaemon

Easy. The credit market problems are basically a lack of trust.

Insurers hurry up and either go bankrupt or find full capital to support their losses.

All well and fine until your the one losing the $$. I went through that with Saul Steinberg and the Reliance train wreck.

Banks belly up to the bar and put ALL the losses on their balance sheets and own up to them including the losses backed by bankrupt insurers. If certain banks need to go bankrupt then that needs to happen too.

Here again, it's nice to be a free market Darwinist until you have money in a bank that goes under. Two ways that ends- Purchase and assumption or liquidation. Either way it's two years before you see your money again.

AFTER all that happens then trust issues get resolved and the credit market starts to open again. There really is no other way it's going to start up again regardless of what the fed wants.

Yes there is another way, that is whats occurring right now. The banks can self replenish through the discount window and the spread with the fed.

As long as the banks are sitting there going "we wrote of $10 billion this quarter, and we're still hiding an undisclosed amount which is obviously big enough for us to need to hide" the credit problems will continue if not expand.

I don't know whether there is hiding going on or if they are discovering things as they find them. I worked for a bank that discovered a total of nearly 700 million in losses in a five year period from one person. It's not that easy to find these things out. If they would have caught it in the first year they would be still in business today.

I swear they're making a mockery of financial reporting requirements with this nonsense. When every person in the world knows they're hiding huge losses and they won't own up to it on their financial reports, or pretend to "discover" more every month, regulatory agencies and auditors are failing in their duties to investors and the financial markets in general.

This goes back to the above statements.

If they try really hard they can drag this process out for years and take down other business that rely on peripheral credit or consumers spending though. Apparently the student loan credit market is coming up to the chopping block soon and who knows what else. Housing won't recover until credit does either. Right now it's looking like 2 more years of falling housing prices the way things are dragging on. I expect fannie/freddie mac are going to be near collapse, requring huge federal bailouts themselves before this is over.

The way the Banking industry operates under the current course of action it would not be signifigant Fed bailout if any.

Bear markets are not bad. They're necessary and valuable. Everybody knows what the answer is, they just don't like it because it doesn't mesh with their feel-good everybody-is-a-winner-all-the-time outlook on life.

You don't think that this Bear has been deep enough?

There are companies that have bankrupcy owed to them, and that needs to, and should happen. If the government wants to get the markets bottoming, then step in and kill those companies that need killing. Or at least force them to declare themselves fully and let the market take out the trash.

That would be a lot of trash.

The government could also tell the accounting firms that if it isn't fully declared on the books by the next quarterly report their firms will be personally liable for any misrepresentations. That should get them doing their jobs.

The Sarbanes Oxley act covers those things. It takes time to figure out what you losses are when you are a large pile of money. I guess you can see how I am leaning on this one.

[Skydaemon]

BOA bailout proposal

Not that this taxpayer bailout is likely, but they're trying.

As for the bear market, I don't think that's started yet.

The way I see it a bear market is going to be characterized by long term investors fleeing from the market and selling their positions wholesale out of a combination of defeat and fear. Those guys don't pay much attention and tend to shrug off minor 10% declines as par for the course, but I think the whole subprime thing probably got their attention.

I think maybe those people aren't doing new trades, neither selling nor buying, but they're sitting on their current positions and still have them, maybe with dips off the highs.

In the meantime, that cedes the market to traders who worship volatility above all else, which is where I think we are now.

If they regain trust in valuations and financial statements and the credit market and everything else, I think that will mark the start of the recovery as the long term guys pick up their activity again.

If they do not get those things soon, then eventually they'll tire of being ravaged by daytraders who don't care which way blue chips go as long as it's double digits, at the same time as enduring a constant stream of bad news.

A constant stream of small pieces of bad news from banks is going to be handled very differently by daytraders than value investors. Daytraders are going to use it as a launching pad for downward volatility each and every time it happens, regardless of the underlying value. Today's 30% drop is tomorrow's 10% bounce.

I guess I see us as being at a decision point, where these long term guys are waiting to see if they're going to get back in, or run for the hills, and we'll recover or have a real bear depending which way it goes. That all stems from trust or lack thereof.

In the meantime, as a trader myself, I'm loving what the market's been doing so I'm content right here.