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Federal Reserve Chairman Ben Bernanke presents his semi-annual report on monetary policy to the Senate Banking Committee in just a couple of hours. Here are a few suggested questions from David Wessel of the Wall Street Journal.
The big question is, “Why isn’t the Fed doing more to help an economy in which inflation is lower than the Fed wants it to be and unemployment is much higher?”
The Labor Department reported that consumer prices fell 0.1 percent in June, down for the third straight month, paced by further declines in energy prices.
On a year-over-year basis, the government’s measure of annual inflation fell from 2.0 percent in May to just 1.1 percent in June, the lowest level since last October when the price index first pushed back into positive territory after almost a year of negative numbers.
After getting a renewal notice for my Wall Street Journal subscription that was about four times as much as what I’d paid in recent years, it wasn’t too hard a decision to let it lapse (honestly, what did they expect?). By the looks of the comments for Jason Zweig’s article this weekend that features fear-mongerer Bob Prechter, you’d think that I’m not the only reader who is no longer a paying subscriber and that the ink is running a little yellow at the WSJ.
Get Ready for a Cataclysmic Market Crash! (Or Maybe Not)
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Could the Dow really drop 90%?
Earlier this month, in an interview that was widely circulated online, market analyst Robert Prechter predicted that the Dow Jones Industrial Average will fall below 1000 within the next six years. The Dow promptly surged back above 10000, but it is worth asking whether Mr. Prechter might be right anyway.
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Mr. Prechter is a technical analyst who studies the past price performance of the markets for clues to the future. He also believes that investors move in and out of the market on predictable waves of optimism and pessimism. “Because the mania [the bull markets of 1982 to 1999 and 2003 to 2007] was so terrific,” he told me this week, “it will be followed by a negative trend in social mood that will lead to a complete retracement.” That would put the Dow back to its levels in 1982, below 1000.“In a deflationary environment, the last thing you want is to own any financial asset,” Mr. Prechter added.
Yeah, and gold will never go over $400 as Prechter famously wrote early in the last decade.
Damien Hoffman over at Wall Street Cheat Sheet had the far superior Prechter column this week when he asked, Is Elliott Wave Theory High Priest Robert Prechter Certifiably Insane?
Russian President Dmitry Medvedev has been in the news a lot lately talking about currency issues and the future of BP ahead of next week’s G20 meeting. In the process, he’s starting to make anyone who didn’t know any better think that he’s actually running the country. Below, the folks at the Wall Street Journal talk about Medvedev’s big week ahead.
To dampen the fun being had by the younger WSJ crowd on what looks to have been a giddy, half-staffed Friday morning in Manhattan when this video was taped, David Wessel is brought in at about the six minute mark to talk about the impact of lower consumer prices on corporate profits and everyone’s favorite summer topic – de-flation.
The Labor Department reported that consumer prices in the U.S. fell last month at their fastest pace since December of 2008, down 0.2 percent in May after a decline of 0.1 percent in April, driven lower by tumbling energy prices.
On a year-over-year basis, the overall consumer price index is now up just 2.0 percent and looks ready to go lower in the months ahead since the big annual energy price increases that have kept the price index elevated during the first half of the year are now all but over.
According to the Caveat Bettor blog, Mohamed El-Erian of Pimco just said something about halving the gold holdings in some of their mutual funds and, while he’s not down on the metal, he doesn’t like it nearly as much as he did a little while ago when prices were lower, going on to argue that if the deleveraging process accelerates, gold will be hit too.
Clearly, the gold market recall’s El-Erian’s “sugar high” characterization of U.S. equity markets last summer – when the Dow was at about 9,000 – and is responding accordingly.
By Tim Iacono, Since 2005
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