Bernanke Is A Solid Pick

Fortunately, President Bush decided not to throw us a curve ball today with his appointment of Ben Bernanke as the next Fed Chair. Recent history clearly had the market a bit spooked with Greenspan’s successor yet to be named, but a relief rally on Wall Street is underway. Bernanke really has only been in the spotlight in recent months, as potential replacements were discussed. Nonetheless, his credentials are strong and I think the market was hoping he’d be Bush’s top choice.

I still believe Greenspan wants to “finish what he started” and will likely bring Fed Funds up to 4.5% before he moves on in late January. If this view proves true, and Bernanke doesn’t continue boosting short-term rates, we could see a nice market rally back to the upper end of the trading range between now and sometime in the first quarter, as the rate hike barrage would be over. That would certainly be welcomed by investors, myself included.

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2 Thoughts on “Bernanke Is A Solid Pick

  1. Jack Miller on October 26, 2005 at 11:41 AM said:

    Ironically a half point move right now would be the huge surprise that would kill the inflation fears, lower long bond rates, take the speculation out of crude oil and after a short sharp correction take this market to the moon.

    I am not predicting anything but it seems that we need one more major negative event for the market to be ready to climb a huge wall of worry.

  2. NO DooDahs on October 27, 2005 at 12:44 PM said:

    Long-term this will be bad for the dollar and the economy. However, the massive growth in the money supply will be good for equity investments, esp. in those companies that make “things.” Why? Well, he’s openly stated that Fed policy of inflating the money supply provides additional ammunition regardless of where the FFR is; that he’d rather let bubbles collapse under their own weight rather than prick them; the Fed has authority to purchase equities or bonds in order to protect against “deflation” and increase the money supply, that (laughably IMO) “deflation” is fraught with peril and to be avoided AT ALL COSTS; and “inflation targeting” is nothing more than second-world econospeak for the biggest deficits one can hide under a rigged CPI.

    This is good for the value of “things” because the value of the dollar will drop.

    This is good for stocks because the first users of the newly created digital money will be large financial institutions, who will need something better than T-Bills and Treasuries to protect the value of the dollars they’ve been gifted with.

    He needs a nickname.

    I have suggested either “Bag Man” Ben, “Helicopter Drop” Ben Bernanke, or simply “Bubbles” Bernanke.

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