Santa Ben’s Wild Helicopter Ride

Quotable

“Include me among those crazed Americans who can’t walk into Home Depot, Target or my local grocery store right now without wanting to grab a king-sized shopping cart and stuff it to the gunwales with 100-watt incandescent light bulbs.

“Maybe it’s the sheer thrill of buying bulbs that in just a month, as of Jan. 1, 2012, will be banned for sale in America. What fun, in this incandescent twilight, to acquire legally what the federal government will soon treat as contraband. Or maybe it’s that gut sense that with the dollar teetering, those beloved old 100-watt bulbs will at least provide a decent store of value, even if all I do is use them to read by for the rest of my life.

“First the 100-watt incandescents will vanish from the shelves. Then the 75-watt, the 60-watt and 40-watt.

“Americans, being an enterprising band, may develop bootleg markets in incandescents. The federal government may not have control of America’s borders, but in Washington such stuff as border security can’t hold a candle to having control of America’s light bulbs. Presumably, federal authorities will now be spending US tax dollars (excuse me — ‘creating jobs’) to deploy light-bulb cops.”
                        Claudia Rosett, New York Post

Commentary & Analysis
Santa Ben’s Wild Helicopter Ride

When you think of what happened to our light bulbs you just shake your head and say: I couldn’t make this &*^% up if I tried! Sadly, when we watch the actions of the Fed we do the same.

Of course if you put Ben’s move into perspective for the Christmas season it may help, as top Wall Street fund managers have been wishing for….

Santa baby, if you could slip some QE3 under the tree, for me!

…and they may get it.

Doesn’t the thought of guys like Buffet, Schwartzman, Paulson, and Dalio standing by the decorated tree, hand-crocheted Christmas caps and bells dangling from their large heads, singing along to the tune of “Santa Baby” just give you goose bumps? Well, maybe more than goose bumps… [Unfortunately a guy named Corzine couldn’t join in the reindeer games this year–his nose grew too long. I heard his ruling elite family–Goldman–is treating him like a black sheep, you know what I mean, like the embarrassing sibling parents gloss over inside those insufferable Christmas letters.]

Interesting isn’t it! On the last day of what was a pretty miserable month for portfolio managers our resident stock market manipulator, aka Santa Ben Bernanke, rides in on his helicopter to drop more dollars on global markets, juicing stocks nicely. He is numero uno on any portfolio managers Christmas card list (with Hank Paulson, former Treasury Secretary, aka serial leaker of non-public information for his hedge fund buddies to trade on, is number two on the list).

US monetary policy looks more and more like one of my favorite childhood experiences–Santa on the fire truck doling out candy to juvenile delinquents–or those that should have been. You may have had similar experiences yourself. We, the kids in my neighborhood and me, used to wait for hours knowing Santa would be riding by on the back of the local fire truck to shower us with goodies; actually cheap candy in retrospect; but to us it was heavenly. We were so giddy and excited. At times it got a little edgy as the truck approached, as we’d scrambled for the candy (very much like the creatures who scramble, push, and shove to get at $2 toasters in Wal-Mart during Black Friday); occasionally a fist fight or two would break out (Christmas cheer was so nice and it built character besides). But the fights didn’t last long as everyone was too excited about the sugar-high waiting to descend upon us. Heavenly indeed!

But of course our highs passed and a bit of depression set in. No more excitement. No more anticipation. Another whole year before Santa on his fire truck would visit again. What a letdown. This really does seem an excellent analogy for our central bank monetary policy. In the end, it has been a major let down for most and only those that grabbed more candy can prolong their sugar high (Wall Street portfolio managers.)

From Bloomberg today [my emphasis]:

Fed Chairman Ben S. Bernanke and his counterparts are revisiting their playbook from the U.S. housing-induced financial crisis that started in 2007 to cushion markets and economies from Europe’s fiscal turmoil today. Yesterday’s move deals with the consequences of the crisis without addressing the causes, said John Ryding, chief economist at RDQ Economics LLC.

“You have to do something to stabilize the sovereign-debt situation,” Ryding, a former Fed and Bank of England economist who is based in New York, said in a Bloomberg Television interview. That requires European Central Bank bond purchases that are “far beyond what they’ve been willing to do so far,” he said.

That sovereign debt problem is trillions of dollars by the way. It’s not the type of thing that easing borrowing costs for financial firms is going to solve. Yesterday’s action likely flowed from the fact that a major institution was about to go belly up somewhere in Europe; just a guess. That would not make for a Merry Christmas for global markets.
So through the purity of pictures, let’s see what has passed since Santa Ben began showering us with candy in the form of QE1 and QE2 (yellow rectangles in charts):

It’s brought two nice rallies in the stock market … sweet!

But this hasn’t left a lasting impact on those who don’t live on the Street. Monetary Velocity continues to tank, after the first candy high from QE1. Ben’s second attempt has had no impact on real people at all; one could argue it has made people more fearful.

But visions of sugar plums continue to dance in the heads of financial institutions – lots of Banking Reserves to support stock loans and hedge fund borrowings but little has seeped into the hands of guys who know how to screw in a light bulb.

All that money and so little lent – Mr. Scrooge is stealing Christmas on Main Street …

Well, at least you can stay home for Christmas and enjoy the love because no one will be buying your house despite how hard Santa Ben and his elves have showered the economy with pixie dust:

Well since Santa Ben’s helicopter began dropping candy on the US economy we have higher stock prices, few jobs, rising fear, and lower home prices. And sadly, we can only expect more of the same under the tree this year.

See, you couldn’t make this *&^% up if you tried …