The Mike Bertelsen Project

The notion of "bank" is expanding. There is an ever-growing macro-economic risk in having larger entities like we have today. An intertwining of the industrial economy and the supply chain with the financial system creates systemic risk.

Does this relatively new corporate structure contribute to the likelihood of industrial supply shocks?

Morgan Stanley, according to its investment documents, is engaged “in the production, storage, transportation, marketing and trading of several commodities, including metals (base a  nd precious), agricultural products, crude oil, oil products, natural gas, electric power, emission credits, coal, freight, liquefied natural gas and related products and indices." Goldman Sachs, according to its own recent investment reports, is engaged in “the production, storage, transportation, marketing and trading of numerous commodities, including crude oil, oil products, natural gas, electric power, agricultural products, metals (base and precious), minerals (including uranium), emission credits, coal, freight, liquefied natural gas and related products and indices.”

The root story.

How is the Federal Reserve responding to the shift?

Fed Chairman Ben Bernanke testified recently on Capital Hill. Items about the future were plenty, but lack of direction was there too.

He touched on six items:

1. The Fed is unlikely to begin “tapering” its policy of quantitative easing before December.
2. The big decisions will fall to Bernanke’s successor.  
3. We still don’t know whether the U.S. economy is approaching “escape velocity”—the point at which it no longer needs extensive support from the Fed. 
4. The federal-funds rate, and the short-term interest rates that are tied to it, won’t be going up anytime soon.
5. For now, the Fed remains Wall Street’s friend.
6. The Fed’s central policy dilemma remains unresolved.

The challenge: how to withdraw monetary stimulus without spooking the markets and undermining the recovery.

     

                                                  Ben Bernanke, Federal Reserve Chairman

High frequency. That's how I describe the market economy these days. We have to be on a whole new high frequency to keep up with what's going on. Or at least I'd like to think so. We have had quite a bit of information to digest. With Quantative Easing in place with the Fed buying mortgage backed securities at a furious pace, which will keep interest rates low; perhaps as far out as 2016, giving investors more incentive for dividend paying stocks. ETF's are also a big product now (no more stock picking).

What will Treasuries be like in one year? Flatlined? Well, maybe. The demand for them surely can't be increasing. Someone must know something I don't. Well.... yeah.

The S&P 500 has had a good three-year run. Throughout it all.... fiscal cliff, etc., the S&P has been a leader as far as market barometers go.

The economy still has a demand problem.

Labor share of income hit an all-time low in 2012. Corporate investors reaped nice gains as the labor market stays weak. The Retail ETF (XRT) beat the S&P 500, while the Homebuilders ETF (XHB) was the cream of the crop.

And all of a sudden housing is back. Thank you Ben! The Fed move is tying more to housing than what I had expected. With that...........


expect housing to continue the recovery.... watch home affordability. And continued labor market woes. Recovering labor yes, but at a slow pace.

The central banker remains at the forefront around the globe. Bernanke really wants the world to jump on board his program for more bond buying. Will the foreign central banks also but mortgage backed securities. Will they invest in our housing? They just might.

That should ease unemployment.   But what about inflation? Are we against the inflation clock? The Fed does not expect inflation to go above 2% at all. Someone, somewhere has to be shaking their head and wondering what the Fed is taking. It really can't be a dose of reality, can it?

I feel the Fed has told the world that we are all in this together. Will all the players come to the table and play the Fed game? We shall see.

34 charts from theatlantic.com was used as a source story.

Well, is QE3 imminent or not? Support for Bernanke's plan is growing all so slowly. Central bankers are still searching for solutions to the European contraction. They'll figure a way to loosen the money supply. When that happens, commodities will rise in price. There was recently a 20% sell-off in commodities. Commodity traders are watching inflation. If higher inflation causes a U.S. dollar weakening, this will be a good bounce for commodity prices.

Wall Street benefited from the Eurozone headline fatigue Tuesday the 5th of June. The European Central Bank rate decision is tomorrow the 6th. What do the eurocrats have in the central system pipeline? We'll soon find out.

The waiting game is on for U.S. stocks. After an impressive first quarter in 2012,the engines haven't really hit higher rpm's in the second quarter. The bias is negative and there is no news. No news is good news.... right?

Federal Reserve Chairman Ben Bernanke is heading to Capital Hill on Thursday. QE3 rumbling seems to be getting louder, but nothing definitive. Pullbacks could bring more money into the market, and we'll see.

The Fed meets on June 19 and 20.