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5/2/2011

What a mess

Well it’s been a while since the Doc has critiqued this crazy mess we try to call an economy and all that can be said over the past few weeks is that the craziness has probably increased.  We’d like to focus on a couple of the more noteworthy events that should be emphasized regarding their importance to the big picture on the economic front.  These include S&P’s comments on downgrading US debt, Bernanke’s historic press conference and a pathetic bout of Fiscal policy.

A couple of weeks ago Standard and Poor’s seemed to shock the global community by painting a negative picture for the credit quality of the US.  This negative scenario issued by one of the largest credit rating agencies was a bold move by the organization and a move that increased its credibility.  This historic event provided a realistic wake-up call to US policy makers and investors alike as it provided a description of the true underpinning of what is transpiring in the US, namely that it’s fiscal and monetary houses are not in order.  And it was released in the face of Stock market that continues to surge higher, calling question into the quality of the gains achieved in the sector.

Last week Ben Bernanke produced another historic event by conducting a press conference to provide an update on the state of the economy.  The information released really provided no great value, was off the mark on certain fronts and the real importance of this event was that it was a non-event.  The QE program seems to be quickly eroding the credibility of the Fed.  This questionable monetary policy came after a pathetic bout of fiscal initiatives in Congress’s last budget debates.  National debt and budget deficits are screaming in chaotic fashion yet the budget agreements seemed to be oblivious to it.

Bottom line is that there are a number of serious problems out there and unfortunately no one seems to be providing any type of real fix.  The result of this “putting a band-aid” on massive economic lacerations unfortunately may just be significant re-valuations of a number of asset classes.