Heads Up

The Ben Bernanke will be holding a press conference today. A couple of things can happen. One is that he talks up the dollar, and talks up the economy like they did last time when he said it was on firmer footing. He may talk about ending QE2. What I can tell you is that it will be all talk (lies). The markets will react negatively, you will have a broad temporarily sell of in everything especially commodities. Yes temporary! Because its just talk.

The Bernanke must maintain the size of the Fed’s balance sheet and try to keep interest rates low for a long long time. Why? Housing and Finance sectors not doing well. Remember all those derivatives and bad mortgages all that has to be worked off. The S&P/Case-Shiller home price index of 20 cities fell 3.3% from February 2010, which is the biggest year-over-year decrease since November 2009. Home prices fell 0.2% in February from the prior month on a seasonally adjusted basis and on an unadjusted basis dropped 1.1% from the prior month. The 20-city index fell in February to 139.27, which is dangerously close to its post-bubble low of 139.26 reached in April 2009.

The Commerce Department reported yesterday that new home sales were down 21.9% from the year ago period and that prices fell by 4.9% in the twelve months prior. The National Association of Realtors reported that sales were down 6.3% from the year ago period and that prices also fell 5.9% from the March 2010 period.

Creating inflation in the housing market is thought of as the only permanent solution to bailing out the big banks and the economy. So the idea that the Fed is close to a significant increase in interest rates and substantially selling assets is a joke.

And I almost forgot, jobs. No real job creation, initial claims are rising. So they really have no choice but to keep QE going. Then there is the overwhelming debt issue and with current real inflation around 7% foreign creditors are running from bonds. The FED has no choice but to keep POMO going, how else could they fund the 1.5 trillion/yr to keep running government.