Election aside, we're stuck with Big Ben
No matter who wins the presidency, Federal Reserve policies and players are unlikely to change much, and Bernanke will be with us a while longer. But Wall Street seems to think change is on the way.
The thinking seems to be that since Romney doesn't like quantitative easing -- the Fed's efforts to inject money into the economy -- Chairman Ben Bernanke won't be able to take the heat of being easy if the Republican wins.
However, I submit that if former Fed Chairman Paul Volcker could take the intense political heat precipitated by his aggressive fiscal tightening in 1980 to '82, then Bernanke could withstand the infinitely easier-to-deal-with flack that being "too easy" (in terms of low interest rates and monetary policy in general) might cause.
In short, a very loose monetary policy won't generate any real criticism.
It's as if he never left
In any case, Bernanke's term does not expire until 2014. While he obviously could decide to resign early, I can't believe that a man whose whole life has been about chronicling the "fact" that the Depression was caused by the Fed not being easy enough (he is wrong about that) would walk out with time left in his term, especially when (in his mind) the world "needs him most."
Thus, we should expect that Bernanke will be the chairman until 2014, regardless of who wins the election.
Given all that, in my opinion, the discussion of what Romney might do regarding a new Fed chairman is wasted speculation.
Nonetheless, if Romney were to win, the market could trade for a short period as if the Fed were about to become hawkish, even though the premise is ridiculous. That's not just because it is likely that Bernanke will serve out his term but also because the composition of the Fed next year will be particularly dovish.
For folks to believe that the Fed is going to get tough if Romney is elected would mean they expect that basically the entire Fed board will change its stripes or walk out, neither of which will happen.
The reason I bring this up is because, as I noted above, there seems to be a growing feeling on Wall Street that if Romney wins, various markets will trade as if the Fed were ready to tighten monetary policy, so I wanted to put this on people's radar screens. As I have just described, I don't think there is going to be a tighter Fed as a result of the election, no matter who wins. While I suppose the Fed could be ever-so-slightly less easy, given the fiscal constraints that might come from a Republican administration, the governors could also decide that they need to ease monetary policy to compensate for budget cuts.
Heads up for a head fake
So the bottom line is that there is liable to be a what's-the-Fed-going-to-look-like crosscurrent laced with election headline roulette, which will most likely entail the idiotically named risk-off trade.
If that occurs, it will likely present opportunities in a variety of assets (which could be anything, from oil to currencies, depending on the mood of the moment), as it is extraordinarily improbable that the Fed is going to approach anything like "not easy," much less actually tightening.
This is why I cast my vote early last week for Ron Paul. Call it a protest vote, wishful thinking, whatever. It’s my vote.
What sad commentary of our political process that I had to write him in on my ballot. How can someone with his congressional experience, and who’s ideology is so focused on the leading problem in our economy, not even be listed on the ballot? It just shows how corrupt, manipulated, and lame our political system really is.
I simply can’t vote for a candidate, Republican or Democrat, who chooses to ignore the abuse of our monetary system by Wall Street and crony capitalists at the expense of the middle class. I’m a better American than that.
My "friend" KOO
On the surface your argument sounds fine
Going down smooth like honey
Yet just regurgitate the DNC line
Believed only by folks whose head is full of Pooh
While ignoring a basic question
What happens when you run out of other people's money?
Saying Obama or any past president is responsible for our over spending and deficit is stupid, and pretty much saying the child in a house hold is responsible for the parents being in debt. The child can ask for money and toys and designer clothes but they can't make the parents buy them or pay for them. Obama and any president can ask congress for money but they don't have to give it. This is evidenced by all the things they don't fund even when they pass bills demanding that this be done and that be done. Congress is a cancer that is killing this country.
The market is being held together by hope for free money. Whether that is in the form of fed easing or European bailouts or Chinese stimulus it all amounts to the same thing. Anything that threatens the gravy train is going to bring the stock market crashing down. Look back at all the news clips and see how many times over the past two years that the market has gone up because of hope for Europe. Not fundamentals and an improving economy - but hope that some country will get bailed out with fake/printed money. A good old fashioned shaking of that faith is all it will take for wall street to crash.
If the stock market participants had stuck to their capitalist ideals and taken their medicine when the collapse happened we would be recovered by now. Unfortunately, they proved that they only believe in capitalism for the rest of us - not themselves. Their position was "give us the capitalism rewards and benefits" - but please hold the pain and negative consequences- that just belongs to the people/peasants. If they had refused the welfare/bailout and all the free money they would have earned my respect. Instead I have nothing but contempt for the so called capitalists. You all talked the talk but in the final analysis when it mattered most you couldn't walk the walk and that is why you will be pushed off the cliff in a few months. Happy landing.
Keeping the enemy close thats funny actually their the only news station that tells the American people the truth about this sorry **** administration that needs to be replaced by somebody that cares about the problems facing the USA.I love this country and Im tired of a president and administration investing my money in stimulis plans that dont work and also I dont believe this president an American if he didnt have anything to hide why would he seal his school records.Maybe he took foriegn aid and really was possibly born somewhere else like Kenya
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ABOUT BILL FLECKENSTEIN
This column is a synopsis of Bill Fleckenstein's daily column on his website, FleckensteinCapital.com, which he's been writing on the Internet since 1996. Click here to find Fleckenstein's most recent articles.
[BRIEFING.COM] S&P futures vs fair value: +1.50. Nasdaq futures vs fair value: +1.70. U.S. equity futures display modest gains after spending the bulk of the overnight session in negative territory. The S&P 500 futures trade higher by 0.1%. Among news of note, Democratic and Republican lawmakers have reached a budget agreement that would avoid another government shutdown. However, the plan still needs to be approved by both chambers of Congress.
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As the devil-may-care bravado of Wall Street marches on, history warns that -- in the end -- there will be the devil to pay.
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