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.

 


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At Long Last – Fed Explains Exit Strategy

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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%.


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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


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Zero Hedge

Has E.T. Gone Home?

Courtesy of ZeroHedge. View original post here.

UFO sightings have been making headlines again lately, notably with The New York Times running an interesting article about several U.S. Navy fighter pilots encountering mysterious objects near the southeastern coast of the United States.

That high-profile story remains unexplained and so do plenty of other UFO sightings reported by members of the public every year like strange lights crossing the night sky or orange disks hovering in the distance.

However, as Sta...



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Phil's Favorites

Food waste: using sustainable innovation to cut down what we throw away

 

Food waste: using sustainable innovation to cut down what we throw away

shutterstock.

Courtesy of Mehrnaz Tajmir, University of Bath and Baris Yalabik, University of Bath

Our appetite for food is a serious problem. The huge amount of energy, land and water used to fill our supermarket shelves mean that modern overproduction and excessive consumerism are rapidly depleting resources and damaging the planet.

Yet still, more than one-third of the world’s food...



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Kimble Charting Solutions

Doc Copper Is Pushing Higher Off 18-Year Rising Support, Says Joe Friday

Courtesy of Chris Kimble.

Gold & Silver have been hot of late! Is Doc Copper about to do the same? Possible says Joe Friday.

This chart looks at Copper Futures over the past 27-years. Copper has spent the majority of that time inside of rising channel (1).

The decline over the past year has Doc Copper testing 18-year rising support and lows of the past 8-months at (2).

Joe Friday Just The Facts Ma’am- Copper is attempting to rally off of long-term support at (3). As Copper is testing the bottom of this support channel, smart money hedgers are making a bi...



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Insider Scoop

Benzinga's Top Upgrades, Downgrades For July 19, 2019

Courtesy of Benzinga.

Upgrades
  • For American International Group Inc (NYSE: AIG), William Blair upgraded the previous rating of Market Perform to the current rating Outperform. American International Gr earned $1.58 in the first quarter, compared to $1.04 in the year-ago quarter. American International Gr's market-cap stands at $48,358,299,270. At the moment, the stock has a 52-week-high of $56.49 and a 52-week-low of $36.16. American International Gr c...


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Chart School

RTT Plus Chart Book (Sneak Peak)

Courtesy of Read the Ticker.

The magic of support and resistance channel lines and how they direct price. Here are some chart disclosed to members via the RTT Plus service. All charts are a few weeks old. 


XAU bound by parallel channel lines.


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Newmont Mining support from Gann Angles.



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US Dollar index (DXY) dominate cycle ...

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Digital Currencies

Cryptos Suddenly Panic-Bid, Bitcoin Back Above $10k

Courtesy of ZeroHedge. View original post here.

Following further selling pressure overnight, someone (or more than one) has decided to buy-the-dip in cryptos this morning, sending Bitcoin (and most of the altcoins) soaring...

A sea of green...

Source: Coin360

Bitcoin surged back above $10,000...

Ethereum bounced off suppo...



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Biotech

DNA testing companies offer telomere testing - but what does it tell you about aging and disease risk?

Reminder: We're is available to chat with Members, comments are found below each post.

 

DNA testing companies offer telomere testing – but what does it tell you about aging and disease risk?

A telomere age test kit from Telomere Diagnostics Inc. and saliva. collection kit from 23andMe. Anna Hoychuk/Shutterstock.com

Courtesy of Patricia Opresko, University of Pittsburgh and Elise Fouquerel, ...



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ValueWalk

Professor Shubha Ghosh On The Current State Of Gene Editing

 

Professor Shubha Ghosh On The Current State Of Gene Editing

Courtesy of Jacob Wolinsky, ValueWalk

ValueWalk’s Q&A session with Professor Shubha Ghosh, a professor of law and the director of the Syracuse Intellectual Property Law Institute. In this interview, Professor Ghosh discusses his background, the Human Genome Project, the current state of gene editing, 3D printing for organ operations, and gene editing regulation.

...

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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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...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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