Thursday, September 20, 2007

Fed Chairman Flunks Final Jeopardy!

Okay, it’s time for ‘Final Jeopardy’ and the category is…The Economy.

The answer is:

Something that argon, helium, fabric softener, Cheerios, potash, wheat, soybean, waste collection, packaging, spot iron ore and air fares all have in common.

What is the question?

We’ll let the Jeopardy! theme song play in the background while you ponder your response.

Meanwhile, as host of this particular show, we offer the following hint.

The answer we are looking for should be easy for those readers attending this week’s Bank of America conference in San Francisco, during which companies ranging from Procter & Gamble to Waste Management discussed most of these items.

Doesn’t help?

Yikes! The ‘Final Jeopardy’ theme song is moving into that slightly higher register which lets you know we’re getting near the end of the line and you better start writing something.

So let us provide one more clue:

There is one individual who undoubtedly was not in attendance at the BofA conference: Federal Reserve Chairman Ben Bernanke, who, according to his own press release, just cut interest rates not to help out damaged hedge funds and sub-prime mortgage speculators but to avert the “potential” for an economic slow-down in an environment where only “some” inflation risk remains.

Emphasis on the “some.”

Does that help? I thought so.

Okay, the theme song is ending with those final, syncopated notes and that goofy trampoline sound: drop your pens!

Let’s see what you answered.

If you answered “What is ‘price increases’?” you’d be right.

And if you wrote “9%” in the case of fabric softeners, and “25%” in the case of low-volume customers of Waste Management, you’d get an extra hefty congratulations from me, your host.

But you wouldn’t be Fed Chairman, that’s for sure.

Jeff Matthews
I Am Not Making This Up

© 2007 NotMakingThisUp, LLC

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.


Sam S. Park said...

I just want to thank Bernanke for killing the dollar and adding more inflationary pressure.

Yeah that's gonna solve it. Make the greenback a joke, driving foreigners out of Treasuries. You would think that the Fed knew that killing the dollar would likely increase long-term Treasury yields.

whydibuy said...

I can't help thinking Ben B was cajoled into this rate cut by Bush. No, the pres probably didn't outright insist on a cut but certainly made it clear that he expected the fed to do its part for the housing crises. Otherwise why throw the dollar under the bus and fully signal a surrender to obvious inflationary data coming from every which way. And this large a cut will only push the long rates higher. Long rates that really govern the mortgage market. So, I'm surprised by this move. It seems counter productive to me.

Anonymous said...

I wonder if a continually weaker US dollar will cause hard assets (think real estate) in the US to be bought by foreign investors based on the exchange rate with other higher-value currencies (i.e., the euro, the yuan)?

I also wonder what would happen if the Saudis no longer allowed oil to be priced in dollars but in a basket of currencies equal weighted in value instead?

Finally, I wonder how hard W leaned on Bernanke to "bailout" the investment banks who put "fuel to the fire" on the subprime mortgage mess? Not very, I reckon.

But then I keep asking myself, why wonder? Just enjoy these (short-lived) stock-market gains and relax! What could possibly go wrong?