No Taper, No Compromise, and No Idea?

 

In what can only be seen as a very interesting non event, the Federal Reserve decided not to reduce it's purchasing rate of fixed income securities.  Wall Street was absolutely convinced this was the month when the so called, 'Taper', would begin, along with the inevitable rise in interest rates, especially at the long end of the yield curve.  Surprise, shock of shocks, helicopter Ben decided, nope, not me, I am not going to be the guy who gives investors bad news.  In some ways, it is not surprising because it is well known Mr. Bernanke is leaving the administration as head of the Fed.  Why should he leave on a sour note?  Why should he take the risk of potentially causing a rise in interest rates when the economy continues to grow at a very slow rate?  As a result, no taper, and whatever the long term consequences are, well, let someone else deal with that mess. 



It is apparent both in the political and financial realms, there is no room for middle ground.  On Wall Street, the dominant mood is either euphoria or despair.  The political atmosphere in Washington is similar because both parties absolutely will not look to find ways to compromise with the opposition. Absolutism is the rule which typically has won out, especially over the last 20 years.

 


Going into the last ten days of the third quarter, the country faces several issues which are going to require a solution.  First is the passage of a budget and extension of the debt ceiling, which has to get done by October 1, 2013.  Republicans are looking to defund Obamacare, and will try and use the issue as leverage with Obama in the negotiations.  Should be a lot of fun to watch, eh?

 


Next, the selection of who will be the next Federal Reserve Chairman is also undecided.  The odds on favorite turns to Janet Yellen, after ex-President of Harvard Larry Summers withdrew his candidacy.  It is apparent that politically, Summers would never have been confirmed in the Senate, so he fell on his own sword.  The only question about Yellen is she has no previous relationship with President Obama, and could be seen as not the President's person.  It is not a lock that she will be the choice, but it certainly does look that way. 

 


Finally, as we get ready for earnings season and the fourth quarter, a reasonable question to consider is if the economy is improving, why not remove government assistance and let it stand on it's own two feet?  As we move toward the end of the year, market participants are going to focus on this very question.  It will be interesting to see how the Federal Reserve approaches policy for the rest of the year, but I suspect, as is the case most of the time, the prudent man knows more surprises are in order.



Bitcoin is all the rage, but most businesses don't think it is ready for prime time-http://www3.cfo.com/article/2013/9/it-value_bitcoin-digital-currency-ripple-zipzap-alan-safahi-expensify-ari-zoldan-quantum-networks-mt-gox-sc5-martti-malmi



Earnings calls are important for both investors and companies, but they certainly could be made more efficient-http://www3.cfo.com/article/2013/9/governance_mckinsey-gaap-earnings-call-sec-expeditors-international-



Amazon.com is a great company, but even they face problems once in a while-http://www.bloomberg.com/news/2013-09-18/staples-radioshack-yank-amazon-lockers-from-stores.html



Thanks for reading the blog this week, and I hope you have a great rest of the week and weekend.

Y H & C Investments, Yale Bock, and the family of Yale Bock own positions in securities mentioned in the blog post. Investing in stocks can lead to the complete loss of your capital. As always, on any company mentioned here, past performance is not a guarantee of future returns. Investing involves risk of losses on invested capital. One should research any investment and make sure it is suitable with your objectives, risk tolerance, risk profile liquidity considerations, tax situation, and anything else pertinent to your financial situation. Also, the CFA credential in no way implies investment returns will be superior for any charter holder.