5 Tough Questions for Ben Bernanke

Apr 26, 2011, 5:09 pm EDT
5 Tough Questions for Ben Bernanke

The clock is ticking on “Bubbles” Bernanke. Come June 30, his latest “quantitative easing” program (QE2) is scheduled to end. The big question on everyone’s mind is: what happens after June 30? Will government bond yields explode?

A number of respected commentators, including bond king Bill Gross of PIMCO, are bracing for the worst—and it’s not hard to see why. Certainly, the Federal Reserve’s behavior in the wake of the 2008 financial crisis has exceeded, in sheer recklessness, anything attempted by any senior central bank in history.

First, the Fed stuffed its balance sheet with more than $1 trillion of dodgy mortgages (purchased with money created out of thin air). Then last November, well over a year after the economy supposedly pulled out of recession, Bernanke’s crew voted to buy another $600 billion of Treasury paper. Read 

Will Cyclical Stocks Be the Next to Soar?

Apr 26, 2011, 3:00 am EDT

Last week’s market action was simply stunning, as wave after wave of better-than-anticipated corporate earnings lifted the Dow by over 300 points in the three days after Monday’s scary 140-point drop. At 12,506, the Dow is now at its highest level since June 2008, while the tech-heavy Nasdaq did even better last week, rising 2% versus 1.3% for the Dow and S&P 500. The Nasdaq was led by earnings reports from Intel (NASDAQ: INTC), Apple (NASDAQ: AAPL), F-5 Networks (NASDAQ: FFIV) and Qualcomm (NASDAQ: QCOM), among others. Are cyclical stocks next to rise? 2 Best Investments in a Weak-Dollar Scenario

The two best investments in a weak U.S. dollar environment are commodities — since they are universally priced in U.S. dollars — and multinational stocks, which reap windfall profits from being paid or priced in appreciating foreign currencies.

Let’s take stocks first. Last quarter’s stellar corporate earnings were fueled by stronger-than-expected sales, upbeat company guidance and a weak U.S. dollar, which boosts the earnings of many multinational companies. Since the average technology company is multinational in scope, they benefit from a weak dollar. Last week, we saw better-than-expected earnings from semiconductors like Intel, cloud computing like VMware (NYSE: VWM) and networking firms like F5 Networks. Read 

Where to Invest When Estonia Has Better Debt Outlook Than U.S.

Apr 25, 2011, 5:14 pm EDT

The U.S. markets ended last week strong following the announcement that the U.S. debt rating could be cut. However, the forces that are pushing investors into international stocks persist. U.S. debt is still out of control, growth rates are still higher abroad and the U.S. dollar continues to make investing in stocks priced in non-dollar currencies the better choice. Uncertainty Sends Investors Into Global Stocks

The U.S. dollar is now approaching its lowest level in 30 months thanks in part to S&P’s decision last week to lower its outlook on U.S. debt. S&P effectively gave the United States two years to get its fiscal house in order and enact meaningful change or be downgraded.

Naturally, President Obama was not too happy about this decision and quickly dispatched Treasury Secretary Tim Geithner to CNBC in an attempt to do damage control. Interestingly, Geithner said that there was “no risk” that the United States’ AAA credit rating would be downgraded. Read 

Fed’s Monetary Malfeasance Creating Catastrophic Bubble

Apr 25, 2011, 3:43 pm EDT

The silent investment story of the year is the collapse of the U.S. dollar against the Swiss franc, Canadian dollar and Swedish krona. The dollar’s decline has been breathtaking, and the fault, as always, lies with the Fed.

Chairman Ben Bernanke assures gullible citizens that he is not “printing the money.” But take a gander at my chart — Adjusted Monetary Base (high-powered money) and Excess Reserves. Parabolic curve comes quickly to mind.

For the Fed chairman to B.S. the citizenry with his “we’re not printing the money” is cause for Mr. Bernanke to look for another line of work. Let me be clear: The Fed’s monetary malfeasance has caused yet another catastrophic bubble. Read 

South Africa the Next Emerging Market Powerhouse?

Apr 23, 2011, 2:00 pm EDT

Part of the reason why China is seeing inflation is massive economic growth enjoyed by the nation. The growth in China, as well as the growth of the BRIC economies, was the subject of a recent summit held in Sanya, China’s southernmost city in the Hainan province.

The BRIC nations — Brazil, Russia, India, China — have all become important and powerful economic forces. Together, they’ve soared past the original predictions of Goldman Sachs executive Jim O’Neill, the man who coined the acronym BRIC, regarding what influence these countries were going to have.

Interestingly, the BRIC summit was actually a BRICS summit, as it included South Africa. The inclusion of another country here in the same breath as the original BRIC nations is significant, because it’s transformed the group into a truly global entity. South Africa is largely seen as a gateway for BRIC trade and investments into the resource-rich nations of Africa. Read 

Politics May Push Feds to Bail on GM Stake

Apr 21, 2011, 12:57 pm EDT

The Treasury Department reportedly is gearing up to dump “a significant share” of its General Motors (NYSE:GM) stock as early as this summer. 

The immediate impact is that taxpayers will lose a hefty share of the more than $50 billion the Obama administration poured into the company two years ago to keep it afloat. Longer term, a Chinese state-owned automaker could emerge winning a bigger stake in a premier American brand.

Published reports earlier this week said the Treasury Department has yet to contact GM about a sale date, but such a sale could happen this summer of early fall. Read 

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