Obama's reappointment of Fed chairman Ben Bernanke was supposed to be a pleasant surprise for the markets today
Wall St barely blinked after the announcement. This was a surprise IMO because Bernanke has been hailed as the "saviour" of the financial system according to the financial pundits.
Ben has also consistently backed the bankers almost everytime as the Fed continues to scramble to keep the financial system in one piece.
Does anyone else find this muted response to Ben's second term strange?
Why didn't we see a 300 point up day as Wall St cheered the reappointment of their fearless leader? The market recently has done nothing but move higher on any word of a new "green shoot". Yet, this shoot was almost completely ignored.
The silence was defeaning in response to the Bernanke reappointment as far as I am concerned. The DOW closed up only 30 points today despite seeing better housing and consumer confidence #'s.
The Iranian people were more joyeous over the announcement of Ahmadinejad's second term versus Bernanke's second term announcement!(scarcasm off)
Is America Ready For a Change?
You gotta ask yourself this after seeing the muted reaction in the markets today after the Bernanke announcement.
I believe the smartest people on the street are not very confident in Bernanke. You need to ignore what the wizards of Wall St said on CNBC in reaction to the news. Wall St is in total spin mode right now because knows that they must restore confidence in order to turn the economy around
Behind closed doors however, Wall St looks at where we are conomically and wonders if this was the right move. I believe that Wall St is petrified at what they see when they look at the real economic numbers. The economy continues to sink despite the largest stimulus package in history.
The Fed has dropped money out of helicopters for 2 years only to see the economy continue to fall apart.
The Freddie news today regarding its mortgage portfolio was a perfect example:
Mortgage Fundamentals Still DeterioratingLast update:
8/25/2009 9:51:19 AM
By Andrew Edwards
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Mortgage financing giant Freddie Mac's (FRE) monthly report showed that whatever improvements there have been in credit markets underlying fundamentals are still declining.
Delinquencies on Freddie's portfolio nearly tripled to 2.95% in July from 1% a year earlier. Freddie holds a portfolio of $2.23 trillion in mortgages and is restricted to buying mortgages from the strongest borrowers. Delinquencies edged up slightly from 2.78% in June.
"July delinquencies showed no improvement whatsoever, and what incremental movement there was, the figures showed accelerating credit weakness," said Jim Vogel of FTN Financial.
The report also showed that Freddie is unwinding its portfolio of mortgage-related investments faster than had been expected by market observers."
Folks, if trends like this continue there will be no recovery. Delinquencies have TRIPLED from a year ago. Recovery? Where?
The supposedly "bullish" housing data that was released today via Case/Shiller really doesn't mean anything because we don't know all the facts.
The massive shadow inventories combined with various foreclosure moratoriums make it extremely difficult to guage how large the housing inventories really are.
I am also hearing more and more stories of families that have simply stopped paying their mortgage(for 2 years or more). The banks have reacted by doing nothing. The banks figure its better to have someone in there taking care of the place then it is to foreclose on it, be resposible for upkeep, and then be forced to take the loss on their books.
God only knows how many squatters there are right now that find themselves in this situation.
It's going to take years to figure out the real story here. I would be in no ruch to buy until the banks puke up the real losses. I am sure its much worse then we are led to believe.
The Bottom Line
Wall St's support of Bernanke is mild at best. They all know he was part of the Greenspan mess that created this nightmare in the first place.
Bernanke's reactions to the financial crisis are unprecedented, and even the smartest guys in the room don't really know how this is all going to play out.
The Fed has basically orchestrated one gigantic fiscal experiment that's created a lot of uncertianty in the markets, and uncertianty is the one thing that Wall St hates most.