Jackson Hole-Bernake's Stage

Aug 17, 2012

Jackson Hole has been Charmain Bernanke's stage in recent years, the place where leading economists gather to hear each other blather on about theory, strategy, and government action.  The Charmain has established the venue as his own special pulpit, using the stage to announce Fed largess and stimulate moribund markets.  The market has been anticipating, no, actually expecting the chairman to extend his generosity as the retreat begins late this week.  If the good Chairman misses the opportunity to please the Street, look out for the fallout. 

I heard a great depiction of the President's economic stimulus plan:  Trickle Up Poverty.  It's the opposite of Trickle Down Economics, where allowing higher earners to keep more of their income leads to more spending and increased hiring.  Trickle Up Poverty is where the President continues to take more and more taxes from higher earners until they approach the poverty line like most of his supporters.  Should be an interesting next four years.

Has anyone else noticed how hot it's been?  Holy smokes!  It must be global warming, which is good for the economy.  Global warming, heat waves, and droughts cause increased spending on fertilizers to offset a lack of moisture for crops; higher fuel prices and therefore better retail comps for retailers such as Costco; better earnings for utilities due to higher air conditioning usage; and of course an increased focus on solar because of higher energy costs and, let's face it, more sunshine. 

A number of economists are focusing again on inflation of food and energy (remember the Fed doesn't count those even though they make up 21% of US consumer spending).  If we truly get a bout of inflation, combined with the weak economy we've had recently, we could get a 1970's style stagflation.  Given Chairman Bernanke makes Arthur Burns look like a spendthrift, any uptick in inflation or credit creation could result in soaring inflation.  Personally I still think we are a couple (+) years from inflation, but once that Genie's out of the bottle, look out! 

Did anyone notice that the Eurozone reported GDP at -0.2%?  Could this be the start of the long awaited European recession?  With GDP in Greece running -6% this quarter, and the rest of the continent (including the UK) grinding slower, its my view that they are already in a recession, and all we need is the official declaration. 

In the US economic indicators have ebbed and flowed, and after another weak summer, it appears indicators are picking back up a bit.  For those perma-bears, don't worry, you're still safe assuming a weak 2013.  Just be careful of the back half of 2012 as a slight acceleration in economic activity combined with more Fed/ECB action could be all it takes to send the market on a year end tear. 

The San Diego Padres sold for $800 million this past week to a group of investors that included some of  the O'Malley family, relatives of the former Dodger owners.  Compared to the Dodgers the Padres were a steal, as the LA team sold for $2.1 billion.  I was fortunate enough to have been given a look at the Padre book, however, it was a bit out of my price range. 

College football is coming, and the Trojans are the AP #1.  While they have a fine team, it appears that they will have to beat Oregon twice in four weeks to advance to the BCS Championship game.  That will be tough for a team with only 15 scholarships to give out. 

Have a great week.

Ned