No, Joe, No One Owes Bernanke An Apology

The prolific and omnipresent blogger Joe Weisenthal is a very bright fellow but, while I am only an armchair psychologist,  I get the impression that he is an obsessive compulsive ADHD sufferer. If that’s the case, to his credit, he has turned what could be severe disabilities to his benefit working with Henry Blodget over at Business Insider, and I applaud him for that.

Henry is a guy who knows a lot about blowing bubbles. That’s important to know, because bubbles are what this is about, not just this article, but “THIS,” in the global, universal, cosmic, biblical sense.  You may not know it yet. Most people don’t until after the fact, but it is what it is.

In this post, given his proclivities, Joe intertwines ideas so quickly and in such a way that it would take a while to isolate the logical inconsistencies, which would be beside the point anyway. What I want to do here is just give my reaction to his big headline and big idea, rather than nitpick through the thought stream to unknot the the twists and wrong turns.

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Young Joe had this to say about the June jobs numbers:

It’s clear who the big losers were today: It’s the crowd that says “good news is bad news and bad news is good news” for the market.

They argue that good economic news is bad, because good news accelerates the day the Fed tightens, and therefore stocks should dive.

They’ve been making this argument pretty much since the day the rally began in early 2009, and basically they’ve always been wrong.

The economy since the bottom has been characterized by steady, underwhelming improvement, and the only time the market has dived has been during periods when it looked like the economy might falter (most notably right after the 2011 debt ceiling brouhaha).

Today we got a very strong jobs report, and yet stocks finished at their highs of the day (even as rates jumped and the dollar jumped) which pretty much drove the stake through the heart of this crowd.

Amazingly, despite surging rates — the yield on the 10-year bond has gone from 1.63% to 2.73% in about two months — stocks are basically at all-time highs. Small caps are at all-time highs.

So if the aforementioned crowd is the loser, then the winner is Bernanke.

via It Looks Like Everyone Owes Bernanke A Big Apology – Business Insider.

bubblebenLet’s put the silly chest puffing about which crowd is the loser and who is the winner aside although Joe seems actually to be using Bernanke as a proxy for himself. Indeed, the chief bubblemeister of The Last Ponzi Game Standing does reign supreme. He’s only been wrong about one little thing. That is that rising stock prices will lift all boats. The fact is that some Americans are treading water but more and more are sinking slowly but surely into poverty, as the 7% sails their yachts  toward the horizon and out of view. Meanwhile, the Taper trial balloons show that Bernanke senses that time is running out and that the bigger he blows the stock market bubble, the more dangerous it becomes and the worse the middle class will fare.

The history of excessively easy monetary policy and the bubbles those policies spawn are riddled with dead bodies. So I think that Bernanke’s policy and his legacy face certain doom. While Bernanke looks like the winner now in Joe Weisenthal’s eyes, that illusion will prove temporary, just as Bob Woodward’s hero worshiping illusion that Greenspan was “The Maestro” was temporary. While those illusions have currency most people believe them, even though many of us knew and know that they would ultimately be revealed for the lies that they were.

As an analyst I usually don’t make “predictions” per se. I identify trends, and do my best to see the signs of major turning points early enough to take the appropriate action. I look at the data and try to isolate the threads that matter and then with those draw clear pictures that reveal exactly what the real trends are and where real cause and effect actually lie. I usually pay no attention to spin but on occasion I feel duty bound to debunk it, like now.  I’ll therefore make an exception to my usual practice and make a prediction, because the cause and likely effect seem so clear to me.

Bernanke will eventually go down as the most reviled Fed chairman in history.

As a serial bubble blower, he already should be, but he has Joe Weisenthal and the rest of the Fed apologist crowd spinning the facts and misleading people prone to believe in the tooth fairy, Santa Claus, and helicopter money as a cure for economic ills. Their illusions will face a day of reckoning soon. As the collapse of the US Treasury market, the greatest Ponzi scheme of all time, progresses, it will reach an inflection point that will take the stock market bubble, the latest housing bubble, and the economy with it. Bernanke’s legacy will be sealed once and for all.

Trends like this take time to play out. Traders and pundits are impatient people. Their lack of perspective is sometimes intentional, which is propaganda, and sometimes simply a matter of naivete and lack of experience. If there’s one thing I’ve learned after 45 years of actively observing this game and participating in it, it is the virtue of patience. Big trends take time and the time draws near for this one. I am quite comfortable in patiently waiting for the denouement. I don’t think it will be long now.

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