Just Do It

Today is the final FOMC Meeting for Ben Bernanke as Chairman. I bet if he had any idea of what he was getting himself into back in 2006, he would’ve stayed in the faculty dining hall at Princeton.

It’s too early to know how history will judge him. Today, however, the judgment will be flying left and right. My opinion as to whether or not the Fed should give us a token taper today is that yes, they should. And if it causes rates to spike or the market to sell off, so fucking what.

Get it on with it already.

Besides, the sentiment on QE’s efficacy is starting to turn. It’s beginning to feel more deflationary than anything else. Corporations are getting by via stock buybacks, they can grow earnings for years and years simply by shrinking the float. That way, they keep shareholders happy, hit their bonus targets and never have to take any risk. There’s no balls in that and there’s certainly no real economic benefit. Corporate CapEx used to average 5% growth per year but is been throttled back to only 1% a year since 2008. This is a primary reason why wages are stagnant, hiring is slow and expansion is still not happening.

As Dan Greenhaus demonstrates, dividends and buybacks have been prioritized over risk-taking and revenue growth and the endless quantitative easing by the Fed is what’s allowing that to continue.

That’s just a theory. I’m sure the opposite case can be made also, you can do anything with data these days, prove whatever you want depending on how you slice and dice it.

This isn’t an economics blog, this is an investor blog. As an investor, I say rip the damn band-aid off already and let the chips fall where they may. We haven’t had a 10% correction since the summer of 2011, it’s long overdue and if that’s what the result of a taper would be, then let’s have it. Everyone’s made plenty of money, time for a harvest.

And by the way, think about the optics of a token taper that doesn’t plunge the economy into recession (it won’t). What the hell will the policy bears say when the turntables wobble but they don’t fall down? Besides, wouldn’t that be a delicious goodbye for Ben to make? It would be like Bilbo Baggins leaving the Shire, Irish-exiting with a disappearing act in the midst of his own birthday party.

Anyway, I’m rooting for a taper today at 2pm. The economic data of late allows for one and it’s time to get policy off of DefCon 3 levels, five years since the worst of the crisis.

I don’t care much about the kneejerk reaction to the start of normalization. But I’ll be pretty excited about the improving psychology that ultimately blooms in its wake.

Just do it, Ben.


Read Also:

Fed’s low rates may be juicing stock buybacks at the expense of jobs (Marketwatch)


This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. cpns 2021 lulusan sma smk commented on Jan 31

    … [Trackback]

    […] Find More on that Topic: thereformedbroker.com/2013/12/18/just-do-it/ […]