Value Plays

Dealing with complex organizational financial structures which are so intertwined in the economic operational functions of our daily lives is a major undertaking. So when the Fed and Treasury battled the early stages of economic crisis it was with a sense of intensity as one would fight a large fire. As things cooled however, the plan for tackling the lethargy left over from the economic backslide left no clear strategy as to how to move forward. More importantly, the Fed needed results. Whether or not those results were substantive did not matter as long as they were perceived as such. Bernanke was committed to the psychology of economics rather than the substantive repairs and major market players perceived this as early as the spring of 2008. The Fed had no choice but to pump in an ever growing evolution of gadgetry ways to under pin asset values. Banks and Investment firms received money for free and a guarantee no harm would reach them outside of whatever regulatory reforms were to come in the future. Of course, there have been few regulatory reforms and the rules under various legislative measures are still be watered down as of today.

The Fed now perceives itself fostering real economic growth which determines values by real demand encouraged by its own interventional demand determined by the values themselves. However, when you decide to promote notions of value, remember that game can be played to your detriment. The world we live in is one where corporate engines are able to adapt to stimulus and cost cutting but are not able nor willing to create jobs in the United States. Without significant job growth, value plays just play out and become a seller's market.

Bears Thank Fed For Running Them Over

Bears are pounding their fists on the table declaring outrage over the Fed's complicity in manipulating asset prices at the expense of, well, the Bears. Everyone knows that pandering to the upside is in the best interests of protecting the business process and free enterprise, you know, the thing that got us here. If all goes well, the inhabitants in the middle of the economy, now living in small huts, will have the same guaranteed opportunity not to participate in the guarantee from loss that the top gets. But at least it is a guarantee and it is only reasonable since it is at the heart of what the Fed and Treasury stand for, inequity.

As I wrote about back in the first week of December, Ben and others at the Fed and Treasury have entered what they hope will be an end game strategy which fits their temperament, being afraid of substantive reform. Why face a challenge. Besides, somethings just cannot be done. Like getting on the Supreme Court if your not a Harvard or Yale graduate. Or being a scholar on the Great Depression and learning more than that being poor in not good, and staying rich is. But that takes help from the Fed.

Banks Lose Pivotal Massachusetts Foreclosure Case

Bloomberg Article

U.S. Bancorp and Wells Fargo & Co., in a ruling that drove down bank stocks, lost a foreclosure case before Massachusetts’s highest court that will guide lower courts in that state and may influence others in bank disputes involving state real-estate law

Trophy Markets

Here we are. Markets are on there highs. Bears are more bearish than ever while the Bulls are looking down at some real damage. The Fed has reiterated its drive to leave no fall back room in asset price rallies, that is, if it can help it, or for that matter, if it can even understand what it is doing and the consequences for market action.

Free market economies, as they are called, have come under the collective interventionist theory that any natural market corrective tendencies are not to be trusted and only the subsidisation of banks and some sovereigns will properly place the world in its right place. Now that place always looks like the top 1% of the world's wealth but someone has to guaranteed happiness.

Bernanke has decided that all of the top should get a trophy just like they do today in our competitive sports environment for children. Every one gets a trophy, even if you stink. It is better to feel good about yourself than to face up the the fact you have absolutely no talent. But like the soccer mom he is, Bernanke insists we should be able to guarantee a financial system which isn't reflective of how talented banks and investment firms are, rather it should be a statement about how wonderful it can be. Wishing is so much fun. It makes us all feel better, now doesn't it baby.