Changing of the Guard
by Rob Kirby, Kirby Analytics. October 24, 2005
Today, President Bush named Ben Bernanke, pending confirmation by the Senate, to replace Fed. Reserve Chairman Alan Greenspan when he completes his term at the end of this coming January, 2006. This would be the same Ben Bernanke who suggested he [the Fed.] could and would "drop money from helicopters" if the economy were in serious jeopardy of slipping into deflation.
Mr. Bernanke currently serves as Chairman of the President's Council of Economic Advisors – a White House posting he assumed in June of this year after serving a stint as Fed. Governor - from Aug. 02.
Bernanke has been described by many in the main stream media as "an academic" economist. From his White House bio, we can clearly see that Mr. Bernanke has attended the right schools and based on his present position – he clearly knows his way around Washington and politics.
As an outspoken Fed Governor, this past March, Bernanke argued that,
"…over the past decade a combination of diverse forces has created a significant increase in the global supply of saving--a global saving glut--which helps to explain both the increase in the U.S. current account deficit and the relatively low level of long-term real interest rates in the world today."
While espousing this view, in the same speech, Bernanke also qualified his opinion by stating,
"Of course, as always, the views I express today are not necessarily shared by my colleagues at the Federal Reserve."
With Sir Alan set to retire and ride off into the sunset, Mr. Bernanke's words will no doubt come under increasing scrutiny, going forward, and his words and thought will most likely be taken to be expressly those of the Fed
Overseas, equity markets began the week on a sour note with Japan's Nikkei Index finishing the day down 93 to 13,106. North American markets began the week with a powerful rally; the DOW ended up 169 to 10,385, the NASDAQ gained 33 to 2,115 and the S & P tacked on 19 to finish the day at 1,199. NYMEX crude oil futures finished the day down .28 to 60.04 per barrel.
Fixed income markets enjoyed a sober session with the 10 yr. benchmark Gov't bond finishing the day 6 basis points higher at 4.45%. The 5 yr. bond closed at 4.32%.
Foreign exchange markets saw the U.S. dollar index lose .23 to close at 89.95. The YEN finished the day at 115.46, the EURO at .8346, the GBP at .5656, the CAD at 1.1868, the YUAN at 8.0885 and the RUBLE at 28.58.
Precious metals finished the day mixed with COMEX gold futures losing 2.40 to 465.40 per ounce while COMEX silver added .02 to 7.68 per ounce. The XAU gold bug index closed at 106.90 – up 1.97 while the HUI added 3.98 to close at 225.88.
On tap for tomorrow, at 10:00 am. the Conference Board is due to release Oct. Consumer Confidence data, expected 85.5 vs. prior 86.6. Also at 10:00 am., the National Association of Realtors is due to release Sep. existing home sales, expected 7.20M vs. prior 7.29M.
Wishing you all the most pleasant of evenings and a prosperous tomorrow!
© 2005 Rob Kirby