Tough to Fight the Bernanke Kool Aid
Ben basically said he would offset anything that the administration and congress implements. No doubt he will try and in the process he will broadly increase the long term risks in owning any kind of asset. My view trys to stay long term and not get caught in the fragile state that is being built. What the Fed is doing is essentially a wash economically, the risk is just being moved to the tax payer, just the opposite long term direction needed.
For me we are at a tipping point in the economy, the consumer and the defense industry are the key sectors to watch. Here is what Reuters said this morning concerning the latest GNP report:
“The growth rate was the slowest since the first quarter of 2011 and far from what is needed to fuel a faster drop in the unemployment rate. However, much of the weakness came from a slowdown in inventory accumulation and a sharp drop in military spending. These factors are expected to reverse in the first quarter. Consumer spending was more robust by comparison, although it only expanded at a 2.1 percent annual rate. Because household spending powers about 70 percent of national output, this still-lackluster pace of growth suggests underlying momentum in the economy was quite modest as it entered the first quarter, when significant fiscal tightening began.”
What I would question concerning their comments, what makes them think the consumer is going to get stronger?