“Bernanke…to Speak or to Spin?” - August 21, 2009

The two big questions the worldwide markets are asking right now are:
(1) “Is the U.S. recovery around the corner?” and (2) “Is it sustainable?”

My answers are “No!” and “No!”

Fed Chairman Ben Bernanke is speaking today at the Kansas City Fed’s annual conference in Jackson Hole, Wyoming. And everybody will be listening to see how he answers these questions.

I don’t see the evidence for an imminent and sustainable recovery. Here are some telling facts:

· In the stock market, insider selling has increased, suggesting that valuations are overstated;
· Short positions are also down, eliminating a source of market support we’ve had during the past 4-month run-up;
· Consumer sentiment was down in August as consumers assessed their own situations and concluded “No recovery in my house;”
· Unemployment is still rising;
· Home values continue to fall;
· The consumer is becoming a saver, more interested in building their own acorn pile than spending;
· And on the banking front, the “alt–A” mortgages – known as the “liar loans” – will reset in 2010 and 11…and they’re bigger than the sub prime volume.

I guess that’s enough!

It will be interesting to see if the Fed Chairman can spin these facts into a “Yes!” and a “Yes!”