Chasing the Economy

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Ben Bernanke’s brother, Seth Bernanke, runs a workers’ comp law practice in Charlotte, N.C.  His most recent blog entry notes that “approximately 30 percent of the American public has chronic pain … and the public needs to better understand how important this is …”
 
Brother Ben noted in his speech this morning that the “slow (economic) recovery has caused some to question whether the United States … (might) now be facing a prolonged period of stagnation.”
 
It appears the Bernanke brothers have an occupational hazard in common:  the temptation to chase ambulances.
 
I don’t know how often Seth finds himself making a knee-jerk decision to take on a plaintiff for the sake of billable hours. But if you are trying to assess Ben’s ability to withstand making a superficial decision when an entire country is worried about a double-dip recession, you don’t have to look much further than his non-committal, Melba toastesque comments he made today. Instead of caving to pressure, Ben said essentially nothing, and nothing is exactly what the market wanted to hear.
 
Clearly, Ben is trying not to pay too much attention to the flashing lights.  You go, Ben.  But like your brother, you will eventually have to make a decision about whether the latest spate of economic woes is worth the chase.

 

– Evan Pondel, epondel@pondel.com
 
 

Rudyard Kipling and the SEC

Rudyard Kipling.jpg

Logging on to the Securities and Exchange Commission’s website this week to check on a client’s filing, I took a brief detour to peruse other parts of the site. 
 
You wouldn’t know by looking at the home page or by clicking on the news section that the market was gyrating and  people were panicked.  In fact, it seemed like business as usual.  And maybe that’s a good thing.
 
I looked at the bios of the five commissioners, including chair Mary Schapiro. They all have impressive backgrounds, but interestingly enough, none ever worked in a publicly traded company.  Hmmm.
 
Last Friday, the day investors were recovering from the previous day’s  512-point stock market drop, the SEC issued a press release announcing that Commissioner Kathleen L. Casey was stepping down, having completed her five-year term.  No mention of the market’s volatility. Other SEC news that day included the Commission’s insider trading charge against a public company board member and his son. Baseball great Doug DeCinces got the same kind of charge the day before.  That was really a bad day for Doug.
 
Again this  week, with unprecedented market gyrations, four unrelated SEC news releases have been issued:  an announcement of a meeting in China regarding audit oversight cooperation; broker fraud involving the sale of investments to a school district in the mid-west; insider trading prior to a Disney deal; and today’s announcement of a new whistleblowerprogram.
 
By the way, press releases aside, there’s other interesting information on the SEC’s website, from special studies, interesting complaints and even job postings.
 
The SEC has been around since 1934, formed during the peak years of the Great Depression, just after passage of the Securities Act of 1933 and the Securities Exchange Act of 1934–both of which were designed to restore investor confidence in our capital markets by providing investors and the markets with more reliable information and “clear rules of honest dealing.”
 
The Commission’s stated mission is “to protect investors, maintain fair, orderly and efficient markets and facilitate capital formation.”
 
The website states that “As more and more first-time investors turn to the markets to help secure their futures, pay for homes and send their children to college, our investor protection mission is more compelling than ever.”
 
The SEC’s steady, business-as-usual approach to news is refreshing and symbolic of Rudyard Kipling’s famous poem, “If,” which reminds us all to keep our heads while others are losing theirs.

 

– Roger Pondel, rpondel@pondel.com
 
 

Dow Sentiment

NYSE

NYSE (Photo credit: wikipedia.com)

This past week has been quite the roller coaster for investors and public companies alike. The Dow fell 513 points on Thursday, August 4, the biggest drop since 2008.
 
Following are some quotes from a few publications to sum up this week’s sentiment among the investment community:
 

  • “The very fact that we have been engrossed in dealing with our debt ceiling issues has taken our focus away from the task at hand–growing our economy and job creation,” said Bill Nuti, chairman and CEO of NCR Corp, a maker of automated-teller machines and other products.”If the U.S. credit rating is downgraded, he warned, “our economy will transition from a slow-growth scenario to a no-growth scenario, and we could likely find ourselves in a double-dip recession.”www.wsj.com
     

  • “You’ve got a weak economy, the aversion of a debt crisis but not a solution, and you’ve got the rest of the globe starting to implode in a lot of areas, especially Europe,” said Barry James, president and chief executive of the James Advantage Funds. “It’s natural that people would react with fear.” www.wsj.com
     

  • “The markets were very similar from a macroeconomic standpoint as they were on May 6 of last year, and obviously things performed much better,” said Joseph Cangemi, managing director of electronic trading for Convergex Inc. “We could have had a situation at any one time where capitulation could have happened, but the market structure itself did not allow it to breach any critical levels.”www.wsj.com
     

  • “Investors are anxious about the U.S. and global economic outlook, and the current market volatility reflects their distress,” said Larry Leibowitz, chief operating officer of NYSE Euronext. “While high volume has accompanied this volatility, we have not seen a real panic,” he added, asserting that exchanges’ performance has been “high” through a “difficult time.”www.wsj.com
     

  • “People are worried about liquidity and where the economy is going, and don’t see any sort of life preserver as yet,” said Doug Roberts, chief investment strategist at Channel Capital Research.www.marketwatch.com
     

  • “The ECB needs to continue to be aggressive in its efforts to solve the euro-zone debt crisis, but this will not happen overnight and as a result, will affect the U.S. economy in a negative way,” said Kevin Giddis, a fixed-income analyst at Morgan Keegan. www.marketwatch.com
     

  • “The most important thing for people to do right now is to take a deep breath, whether you’re reacting to the latest, pretty good job numbers or you’re still in shell shock from everything else we’ve learned in the last week,” said Jerry Webman, chief economist at Oppenheimer Funds in New York.www.yahoofinance.com
     

  • “The burden of debt has become much more onerous because the outlook for growth is sliding back. That is very concerning for the markets,” said Don Smith, economist at ICAP, the largest inter-dealer broker in the world. “The fear is ultimately about defaults and business failures.”www.yahoofinance.com

 

PondelWilkinson, investor@pondel.com