Posts Tagged ‘Fed Chairman Ben Bernanke’

Fed Jawboning And Market Performance

Is there a tendency for the market to act in a particular way around the Fed Chairman’s testimony to Congress?  Welcome to Jason, who answers this question in the following piece. – Ilene

Fed Jawboning And Market Performance

Courtesy of Jason Goepfert at Sentiment’s Edge 

Here’s a reprint of something we discussed on the main site earlier this year.  It’s as relevant now as it was in February…

Mr. Bernanke is now scheduled to speak before Congress in the Semiannual Monetary Policy Report to the Congress.

We’ve discussed this event several times over the years, but it’s worth touching on again, as we have seen some pretty consistent market action surrounding these speeches.

The day before the Fed Chair’s testimony to Congress, the S&P 500 has been up nearly 70% of the time.  But the day of the prepared remarks, it was up 44% of the time, and the day after it was up only 28% of the time (7 out of 25 occurrences).

For some reason, these meetings have an uncanny tendency to occur very near market inflection points, with the market moving substantially in the other direction from the move preceding the testimony.  The chart below highlights these meetings (the gray vertical lines) superimposed on a chart of the S&P 500.

 
Fed Chair = Market Timer

If the S&P 500 was negative over the month prior to the testimony, then the month following the meeting it was up 8 out of 10 times with an average return of a respectable +2.3%, though the risk/reward over the next month was about evenly distributed (-3.8% to +3.9%).

However, if the S&P was positive heading into the meeting, then the following month also showed a positive return only 13% of the time (2 out of 15 instances) and an average return of -2.8%.  The risk/reward was extremely skewed to the downside (-5.9% to +1.6%).  The last 12 occurrences, dating back to 1998, were all negative.

 


Tags: , ,




At Long Last – Fed Explains Exit Strategy

Click here for a FREE, 90-day trail subscription to our PSW Report!

At Long Last – Fed Explains Exit Strategy

Fed's Exit PlanCourtesy of Mish

After months of hemming and hawing Fed Chairman Ben Bernanke has finally detailed The Fed’s Exit Strategy in an Op-Ed in the Wall Street Journal.

The depth and breadth of the global recession has required a highly accommodative monetary policy. Since the onset of the financial crisis nearly two years ago, the Federal Reserve has reduced the interest-rate target for overnight lending between banks (the federal-funds rate) nearly to zero. We have also greatly expanded the size of the Fed’s balance sheet through purchases of longer-term securities and through targeted lending programs aimed at restarting the flow of credit.

My colleagues and I believe that accommodative policies will likely be warranted for an extended period. At some point, however, as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road. The Federal Open Market Committee, which is responsible for setting U.S. monetary policy, has devoted considerable time to issues relating to an exit strategy. We are confident we have the necessary tools to withdraw policy accommodation, when that becomes appropriate, in a smooth and timely manner.

The exit strategy is closely tied to the management of the Federal Reserve balance sheet. When the Fed makes loans or acquires securities, the funds enter the banking system and ultimately appear in the reserve accounts held at the Fed by banks and other depository institutions. These reserve balances now total about $800 billion, much more than normal. And given the current economic conditions, banks have generally held their reserves as balances at the Fed.

But as the economy recovers, banks should find more opportunities to lend out their reserves. That would produce faster growth in broad money (for example, M1 or M2) and easier credit conditions, which could ultimately result in inflationary pressures—unless we adopt countervailing policy measures. When the time comes to tighten monetary policy, we must either eliminate these large reserve balances or, if they remain, neutralize any potential undesired effects on the economy.

Bernanke Explains Fed Tools

The tools Bernanke mention in the article are:

Paying interest on reserves. This was authorized by Congress in 2008. Supposedly this was going to put a floor on interest rates at 2%.


continue reading


Tags: , , ,




Bernanke Suffers From Selective Memory Loss

Courtesy of Mish

Bernanke Suffers From Selective Memory Loss; Paulson Calls Bank of America "Turd in the Punchbowl"

Federal Reserve Chairman Ben BernankeFed chairman Ben Bernanke’s memory seems to be failing at an amazingly convenient time, for Bernanke. Please consider Bernanke Blasted in House.

Federal Reserve Chairman Ben Bernanke faced open hostility from lawmakers who barraged him during a Congressional hearing over his handling of the financial crisis and the central bank’s role in reshaping the banking system.

Setting aside the deferential tone usually reserved for Fed chairmen, members of the House Committee on Oversight and Government Reform repeatedly interrupted Mr. Bernanke at Thursday’s hearing to review the Fed’s role in engineering a government aid package for Bank of America Corp. The lawmakers pored over internal Fed emails subpoenaed by the committee and projected on a screen in the hearing room.

Much of the heat focused on the Fed’s part in pushing Bank of America to complete its acquisition of Merrill Lynch in January. House members on both sides grilled Mr. Bernanke on whether he threatened to force out Bank of America Chief Executive Kenneth Lewis. They accused him of inconsistencies in his statements and of keeping information from other agencies.

The biggest point of contention was over whether Mr. Bernanke threatened to oust Bank of America CEO Mr. Lewis. Bank of America approached top U.S. officials in mid-December about abandoning its deal to buy Merrill Lynch.

Mr. Bernanke defended the Fed’s actions, saying the central bank acted with the "highest integrity" in the negotiations with Bank of America. "I did not tell Bank of America’s management that the Federal Reserve would take action against the board or management," Mr. Bernanke said, adding that the decisions were "taken under highly unusual circumstances in the face of grave threats to our financial system and our economy."

Lawmakers pointed to a Dec. 20 email written by Richmond Fed President Jeffrey Lacker. One of a series unearthed by the panel, the email recounts a conversation between Messrs. Lacker and Bernanke in which the Fed chief planned to tell Bank of America that "management is gone," if they quashed the deal and later needed more government aid, wrote Mr. Lacker.

Pressed on the issue, Mr. Bernanke said he didn’t make such a comment to Mr. Lewis and didn’t remember that part of the conversation with Mr. Lacker.

Rep. Dan Burton, (R., Ind.), a


continue reading


Tags: , , ,




 
 
 

Phil's Favorites

How high will unemployment go? During the Great Depression, 1 in 4 Americans were out of work

 

How high will unemployment go? During the Great Depression, 1 in 4 Americans were out of work

Unemployed people wait outside a government office in NYC in 1933. AP Photo

By Jay L. Zagorsky, Boston University

CC BY-ND

The U.S. unemployment rate climbed from a half-century low of 3.5% to 4.4% in March – and is expected to go a lot higher.

But could the rate, as ...



more from Ilene

Zero Hedge

Mysterious Colorado Doomsday Shelter For When "Law & Order Breaks Down" Sees Spike In Interest

Courtesy of ZeroHedge View original post here.

As the pandemic unfolds across the US, city dwellers are getting the hell out of dodge and escaping to rural areas. We noted this last week, with many leaving large metro areas in California, fleeing for the mountains and rural communities to limit their probabilities of ...



more from Tyler

Biotech/COVID-19

Why wear face masks in public? Here's what the research shows

 

Why wear face masks in public? Here's what the research shows

People have resorted to using scarves and bandanas as face masks to protect against spreading coronavirus. While cloth masks aren’t as effective as surgical masks, research suggests they can limit the spread of droplets. Jens Schleuter/Getty Images

Hector Chapa, Texas A&M University

With the coronavirus pandemic quickly spreading, U.S. health officials have changed their advice on face masks and now recommend people wear cloth masks in public areas where social...



more from Biotech/COVID-19

ValueWalk

Junior gold stocks offer a place of refuge in a falling market

By Michelle Jones. Originally published at ValueWalk.

Junior gold stocks have taken a beating alongside other stocks, but history suggests this could be the time to dive in. The Vaneck Vectors Junior Gold Miners ETF is down from where it was in February, although it’s starting to show signs that it could revive soon.

Q4 2019 hedge fund letters, conferences and more

Crescat likes junior gold stocks

In their March update to investors, Crescat Capital said junior gold stocks retested the lows of a nine-year bear market. ...



more from ValueWalk

Kimble Charting Solutions

Depression Coming or Is the Bottom Already In? Joe Friday Says Your Answer Lies Here!

Courtesy of Chris Kimble

Are we headed towards a Depression or is the worst already behind us? In today’s world, comparisons to the great depression are easy to find.

Are the Depression concerns well founded or are the declines of late already pricing in a bottom?

In my humble opinion, this chart and the upcoming price action of this index will go miles and miles towards telling us if we are headed towards very tough times or if the huge declines of late are actually in a bottoming process.

This chart looks at the Thomson Reuters Equal Weighted Commodity Index on a monthly basis over the past 54 years. The index has been heading south, reflecting weakness in demand for basi...



more from Kimble C.S.

Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

http://www.insidercow.com/ more from Insider

The Technical Traders

Founder of TradersWorld Magazine Issued Special Report for Free

Courtesy of Technical Traders

Larry Jacobs owner and editor of TradersWorld magazine published a free special report with his top article and market forecast to his readers yesterday.

What is really exciting is that this forecast for all assets has played out exactly as expected from the stock market crash within his time window to the gold rally, and sharp sell-off. These forecasts have just gotten started the recent moves were only the first part of his price forecasts.

There is only one article in this special supplement, click on the image or link below to download and read it today!

...

more from Tech. Traders

Chart School

Big moving Averages and macro investment decisions

Courtesy of Read the Ticker

When price is falling every one wonders where demand will come in.


RTT black screen Tv videos study the simplest measure of price (simple moving average). What has happen before guides us now. 














Changes in the world is the source of all market moves, to catch and ride the change we believe a combination of Gann Angles, ...

more from Chart School

Members' Corner

10 ways to spot online misinformation

 

10 ways to spot online misinformation

When you share information online, do it responsibly. Sitthiphong/Getty Images

Courtesy of H. Colleen Sinclair, Mississippi State University

Propagandists are already working to sow disinformation and social discord in the run-up to the November elections.

Many of their efforts have focused on social media, where people’s limited attention spans push them to ...



more from Our Members

Digital Currencies

While coronavirus rages, bitcoin has made a leap towards the mainstream

 

While coronavirus rages, bitcoin has made a leap towards the mainstream

Get used to it. Anastasiia Bakai

Courtesy of Iwa Salami, University of East London

Anyone holding bitcoin would have watched the market with alarm in recent weeks. The virtual currency, whose price other cryptocurrencies like ethereum and litecoin largely follow, plummeted from more than US$10,000 (£8,206) in mid-February to briefly below US$4,000 on March 13. Despite recovering to the mid-US$6,000s at the time of writin...



more from Bitcoin

Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

TODAY's LIVE webinar on stocks, options and trading strategy is open to all!

Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

...

more from Promotions

Lee's Free Thinking

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

 

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

Courtesy of  

The repo market problem isn’t the problem. It’s a sideshow, a diversion, and a joke. It’s a symptom of the problem.

Today, I got a note from Liquidity Trader subscriber David, a professional investor, and it got me to thinking. Here’s what David wrote:

Lee,

The ‘experts’ I hear from keep saying that once 300B more in reserves have ...



more from Lee

Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

more from M.T.M.





About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

Learn more About Phil >>


As Seen On:




About Ilene:

Ilene is editor and affiliate program coordinator for PSW. Contact Ilene to learn about our affiliate and content sharing programs.