Don't Worry Be Happy

Ben Bernanke, chairman of the Federal Reserve, made history today when he held a press conference and fielded questions from reporters (one economist/reporter, Steve Leisman). He spoke about his interest rate decision and other matters like inflation, quantitative easing and how the Fed plans on dealing with an economy that still struggling despite two rounds of massive money printing.

This was Bernanke's opportunity to fight back against criticism from some lawmakers (Ron Paul), economists and foreign officials who say that the Fed's efforts to prop up the U.S. economy with more than $2 trillion in stimulus has caused inflation, weakened the dollar, and has not improved the labor markets. He failed to deliver on all counts.

The Bernanke was visibly nervous, his voice was tremulous, which was odd to me because I'm sure he knew there were no tough questions coming. They hand-picked the reporters and were all too polite towards Ben (it made my teeth hurt). No one got in "the Bernank's" face when he gave shall we say less than adequate answers(in all politeness). 

Here are some of the highlights:

• Central bank is in no rush to scale back its support for the economy with the labor market still in a "very, very deep hole." 

• The forecast for 2011 economic growth has been lowered due to inflation, blamed the high price of oil on global growth (demand). Regarding economy, changed language from "firmer footing" to moderate growth (less than two percent).

• decided it will complete the purchase of $600 billion in bonds in June to support the economy's recovery, and said it would keep its balance sheet, currently at $2.67 trillion, steady for a time to ensure its support does not fade. The moment he said that Silver and Gold shot up. They had already reversed after the 1230 statement release, but I think this statement of support not fading was a big nod to QE3. Ask yourself, will this Titanic sized economy recover by June. What will be different in two months. Nothing, expect more of the same.

• We plan to keep overnight interest rates, (held near zero since December 2008) for "an extended period."

• "It is a relatively slow recovery,"The combination of high unemployment, high gas prices and high foreclosure rates is a terrible combination. A lot of people are having a tough time."

• The Fed lowered its projection for unemployment but said it would stay elevated over the central bank's three-year forecast period. The jobless rate stood at 8.8 percent in March.

• "The pace of improvement is still quite slow and we are digging ourselves out of a very, very deep hole," Bernanke said.

• raised its estimate for 2011 inflation to account for a surge in oil prices. However, it bumped up its core inflation forecasts only marginally and expressed confidence the jump in the cost of oil would not spark broader inflation. 

• on the issue of the falling dollar, deferred to currency policy as an issue for the Treasury Department, Bernanke said a strong, stable dollar was in the interests of the United States and the world economy. 

Here is what I heard today, "don't worry about inflation because is a temporary phenomenon". Action: everything inflation related went up

Don't worry about the dollar, we want a strong dollar (wink, wink). But what about the loss in the value of the dollar, "its not my yob main". Ask Tim. Dollar went down to furthest level since 08 financial crisis.

Mr. Bernanke, whats your plan for jobs, keep interest rates low and keep printing money. But Mr. Bernanke is that really going to work, Ben, "sure it is". Action: Sell dollar, buy commodities.

But Mr. Bernanke what about the debt issue, "well I told the folks in congress they have to take a hard look at it". But Mr. Bernanke what about all these folks selling our bonds, who is going to lend us money with the dollar going down everyday?  Ben: don't worry be happy, don't you know my computer at the federal reserve has special powers to make more money than you can imagine.

But Mr. Bernanke won't that hurt the dollar, Ben" Don't be ridiculous, didn't I just tell you I want a strong dollar, Reporter "Oh, okay, my bad". 

So what do we do based on this information: Nothing different. Everything is playing out like I wrote on January 3rd. Stick with metals, oil, soft commodities (Ag), short bonds. Let the good times roll. Things that haven't worked out Uranium miners and Japan both were doing great before the earthquake.