Market Analysts and Managers Irresponsible 

There's an argument circulating through the marketplace that Chair Bernanke was irresponsible by suggesting  that

there are significant downside risks to the economic outlook, including strains in global financial markets

Supposedly, the Federal Reserve made a mistake by evoking the above, and should restrain its judgement on economic conditions that affect monetary policy. Avowed is the delicately obtuse cynicism that for market analysts, managers and strategists to properly advise their clients, the Fed should be silent and keep the public ignorant of matters that affect the public's respective wealth and future. Disclosure of pertinent content is the investment manager's discretion, seems to be the underscored presumption.

It can only be a relief that some men like Chair Ben Bernanke are still around and that they have the required courage to tell it as it is. As if no one ever knew that there was an economic maelstrom, or squall as my favorite columnist and commentators from Fictional Reserve Barking characterize it, evolving on globalscapes.

Fellas, give yourselves a break. The majority of you are certainly confused, and justly so.  Consider, since when do the analysts, strategists and managers dictate appropriate communication guidelines. Basic deontology suggests that these advisors have a responsibility to seek out relevant data and give comprehensive information that will permit the client to respond appropriately to the situation.

Moreover, when the public buys and owns stocks or corporates bonds the public are shareholders and stakeholders in those companies.  The public has the right to know whether there's exposure to risk out there. It is not the discretion of the advisor to weigh the call on disclosure or not. Get real guys!

A  lot of people would never have received the floats if Mr. Bernanke had not sounded the warning of the imminent squall. Maybe some of the public were in those sell-offs. Good for them, if that was best for their visions.

One should be very pleased that individual Chair Bernanke and institutions like the Federal Reserve are unconstrained by political considerations, originating in Washington or New York. One also hopes that most cynics and whiners get canned under the circumstances not for ill-advising clients but for suggesting that the Federal Reserve had no reason to come out with their caution. That is professionally unethical. The narrative certainly makes a case for passing the buck for their own incompetence and lack of market insight. It certainly translates into a good show; but it should not be produced at the expense of the public.

Bernanke: Not Responsible for the Collapse of Markets of Sept 21-22, 2011

The announcement following the FOMC meetings of September 20-21, 2011 was expected. The infrequent decision to 'Twist'- swap short-dates Treasuries against longer date securities, particularly the very long dates, was expected.

Obviously, the respective underlying intention was to promote the consumer and housing sector with inexpensive mortgage financing, and flatten those yield curves and reward tradeoffs across the Treasury spectrum.  Whether those markets react will depend on whether or not the consumer generates demand for either new homes or refinancing existing homes. In both latter cases, the intended consequence is to alleviate pressure on household debt and unlock consumer spending into the economy.

Chairman Bernanke had nothing to do with the markets' collapse world-wide.

At first, the market reacted positively to the obvious, concluding that it had already discounted the Fed's intervention for all intents and purposes. That didn't last long. Some of the more enlightened participants realized that the most important statement had been skimmed over by the markets.  Mr. Bernanke had emphasized in explicit terms the dire prediction on the global economy that was unexpected in the announcement  and, de facto, lent a deaf ear, dismissing the GOP leadership's political rhetoric of the previous day.

Chairman Bernanke,  previously informed by Secretary of the Treasury  Mr. Tim Geithner's return from the meeting of European Finance ministers in Poland last week, characterized his caution on the world economy in the following manner: 

Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets. 

The markets tumbled when players realized that the global economic situation was not tepid but turbid.  Financials leading the slide, dropped across the board, catalyzed by a Moody's downgrade of Bank of America, Citigroup and Wells Fargo on their debt. The only anomaly was Hewlett Packard rallying on a rumour that their CEO had been ousted. Talk about quality trading, as if a new, yet unidentified CEO will reverse macroeconomic circumstances. The morning should reverse the ridicule and ratify the quality of its governance.

All markets in Asia and Europe tumbled overnight. The additional information from Europe and China that the Purchasing Manager's Index (PMI) is contracting, followed by market commentaries that it may suggest deterioration in manufacturing output,  is sending signals globally to investors that the only viable route is away from equities for now- a rush to safety and US Treasuries. In fact, all currencies, except USD, all commodities including gold,  and Treasuries were down or short dates unchanged with the exception of the 6mth yield rising.

But why are BRIC indexes dropping? Fundamentally, there is no structural demand within those economies that can permeate the level of manufacturing and production that has been underlying their respective growths. Until further ado, BRIC depends on Western economies and spending. Suffice it to follow the Russian equity market this day after. Significant is to realize that BRIC cannot, at this moment of their development, drive the global economy out of its slowdown. If Japan could never act as the world engine, why should BRIC assume the role. The same is true of Europe; its lame-duck behaviour is unjustified under the conditions. Europe must put its condos in order, if the investment is to be successful.

What the headlines suggest as Mr. Bernanke's Market Debacle is absolute nonsense!

The nonsense was the GOP's leadership criticism of the Federal Reserve decisions. Boehner, Cantor & Associates' understanding of basic economic realities is unreliable and incomprehensible for that level of leadership. They should simply acknowledge that without employment there is no spending and there are no sources of Treasury revenue; and without revenue sources, there is no deficit reduction. If they persist on professing that deficit myth: that deficits matter for the US economy, they will make matters worse. They should recognize their own shortage of viable solutions, and grasp the moment to support fiscal spending programs. As for Rating Agency downgrades, they don't  matter at this moment.  Recently, they have been shrugged off by all sovereign levels.

Unless the US economy is activated, and this won't happen as a result of Federal Reserve monetary policy, the global economy will remain in a state of stagnation for a long time. It is obvious that any solution must come out of Washington. A reasonable start is to couple that  result from flattening long date yields with an aggressive mortgage refinancing program for the suffering homeowners and well-intentioned consumers.