We Will Not Monetize The Debt – Bernanke 6/3/9

When did Ben Bernanke say that? Seventeen months ago he did. He testified the following before congress:

“Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth,” Bernanke said in testimony to lawmakers today. “Maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance.” He said the Fed won’t finance government spending over the long term, while warning that the financial industry remains under stress and the credit crunch continues to limit spending. “Either cuts in spending or increases in taxes will be necessary to stabilize the fiscal situation,” Bernanke said in response to a question. “The Federal Reserve will not monetize the debt.”


See Bloomberg Article here


Yesterday the Fed announced that it would monetize the debt some more. They will buy $600 billion to start, in Treasuries maturing between 21/2 and 10 years. I’ll save the rhetoric, as there is enough going around the street right now. Ben Bernanke explained the decision in a Washington Post op-ed this morning:

“This approach eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.”

So everyone please take your hat off and salute the genius of David Tepper. He recognized that the game is changed. Stock fundamentals are not as important as figuring out what the Fed will do, and front running it. The only caveat I would add, is that playing that game of chicken requires that the government will do what it says it will do. Because they always do that, right (Bernanke 6/3/9 –“we will not monetize the debt”)?

By the way, you guys watch the Obama press conference yesterday mid-day? Did you catch the first few questions? 1) Are you willing to admit this wasn’t just a vote against Democrats but a vote against you and your policies?  2)  Do you think this is America telling you that you just don’t get it? Wow! To quote Mel Brooks, “When you die at the palace, you really die at the palace…”



Where we left off 4:00pm EST:

DJIA                                             11,215.13                                      +26.41

S&P500                                          1,197.96                                        +4.39

NASDAQ Composite                     2,540.27                                        +6.75

Futures now at 7:30am EST:

DJIA:                                                     +64

S&P500:                                                +7.5

NASDAQ 100:                                     +12.00

Key Data out today:


08:30:                    Non-Farm Productivity

08:30:                    Initial Jobless Claims

08:30:                    Continuing Claims

Wherever those numbers come in doesn’t really matter, does it.



Since the prior close, some key stories:


–       Stocks and Metals Surge as Fed Expands Stimulus.

–       WSJ says to get ready for food price inflation.

–       SEC Bans Naked Access

–       US Cars Sales Climbed in October.

–       A bad day for POT; First California Vote, and now Canada rejects BHP’s bid.

–       BHP may buy back its own stock instead now.

–       BNP reports good results. Number 1 Bank Worldwide by size.

–       Delta’s flight attendants reject unionization effort.

–       What The Fed Did And Why (read the op-ed in the Washington Post)

–       Prudential beat estimates.

–       Bachus slams “Volcker Rule”

–       The head of the Hong Kong Monetary Authority said that the Fed’s stimulus adds to the risk of a housing bubble and may force additional measures to cool prices.



Pre-market: ALU, APA, ATK, BCE, BDX, BNP Paribas, BR, Cap Gemini, CCOI, CVC, DTV, HNT, HUN, LAMR, MAN Group, MF, MFC, Old Mutual, PCS, RSA Insurance, SIRI, SNI, Swiss Re, TDC, Telecom Italia, TKLC, TWC, UN, WIN, Zurich Financial