Tag Archives: Ben Bernanke

November 2013 Capital Market Review (Video)

At the end of each month we like to look back at the more important and dramatic events of the prior to highlight our thoughts and verbalize them in greater and more personal detail with Video commentary. Past Video’s can be found here on our Monthly Review Video tab . As a living digital diary we look forward to reviewing in the future.

Here we go for a November 2013 review!

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In suspender with belt like fashion, if neither of the above are working, click here!

Welcome Janet Yellen, Now Get to Work

As of February 2014, Ben Bernanke will depart his position of Federal ReserveBernanke Yellen Chair (some say one of the most powerful positions in the world…I digress). The early portion of Big Ben’s term was horrific, challenging, and down right scary at times. That was then, and this is now, as of late we have ridden the wave of stimulus through asset purchases as Big Ben rides into the sunset…or more likely authorship and speaking engagements. Enter Mrs. Yellen, from our perch her term appears to begin with the removal of stimulus. Good Luck, we will be watching interest rates closely …. 4% may be just around the corner.

10 Year Treasury 12-2-13

4% looks reasonable… looking longer term!

NSA Spying /Security Breaches…

Interesting, we think the story is still being written on this as more NSA revelations become public. There is no easy way say “We all do it !“, while only the USA has been publicly reprimanded. Through our international contacts we have found it to be a big deal from those being spied upon. We throw no blame and have no insights to the complexity of this issue. We will keep a watchful eye as shareholders of world exporting companies for tougher international competition in certain situations. Nothing major YET …. these things usually become bigger at a time of crisis.


Wire Fraud Alert, All About the Password

Lastly we noted the increase in on-line fraud with a modern-day Bonnie and Clyde like boldness. Unknowingly of the macro increase we wrote about this in our latest newsletter only to be repeatedly informed through industry associations and our various vendors. It is real, and while not with a gun, it may cost more than an old style “Bonnie and Clyde” robbery.


Bonnie & Clyde

Have A Great Day!

John Kvale CFA, CFP

8222 Douglas Ave # 590
Dallas, TX 75225

Jackson “Bernanke-less” Hole Meeting …The LAST day of the summer?

Each year since 1981 at this time of the year the Bank of Kansas City invites major Fed heads, economists, and educators (which then leads to swarms of press) to Jackson Hole Wyoming for an extend visit at the Jackson Lake Lodge.

Big Ben Skips Jackson Hole

So if you were afraid of being re-appointed, or really wanted to get the point across that you did not want to do another term as Fed Chairman, skipping the Jackson Hole event would be the nail in the coffin. Just as we said much earlier in the year, Big Ben is out and skipped the event, confirming our fate as professional investors, the need of figuring out who the next chief will be.

Jackson Hole Less about Economics: Posturing

Ohhh, to be a fly on the wall, this year we feel the Jackson Hole event is less about Economics and more about posturing.  Certainly behind the scenes, daggers, compliments, and favors are flying like flies as the possible new Fed Chief will certainly rise over this meeting.


Today is a travel day as we head back to home base from our remotely connected office. It has been nice working remotely and staying in touch with the capital markets and clients as well. From a technology standpoint…..while a little loose out of the gate, it came through terrifically (thank goodness for the tether wifi feature) and we look forward to a repeat next year. Thanks again to Cathy, Donald, Team 16 and the gang for the smooth sailing.

LAST day of the Summer??

According to my kids, today is the VERY LAST day of summer as Monday marks the dreaded start of school for them….the flu is better…according to them… End of Summer

If they are correct, be sure to enjoy and spend time with those special in your life.

Happy Friday!

John Kvale

PS Football Season Anyone ???

8222 Douglas Ave # 590
Dallas, TX 75225 

Boom….Bernanke Backpedals

Markets are really getting a lift today from a question and answer session of economists in Boston last night with Ben Bernanke.

Here is the key quote:

“Highly accommodative monetary policy is what is needed for some time in the future, especially given fiscal restraint”

This is somewhat of a U-Turn from his comments just a few weeks back.

Our thought, rates moved up too quickly for his liking.

Here is the 10 Year US Treasury

10 Year Yield 7-11-13

Fundamentals will eventually win

Earnings season is about to kick off, we need to see growth to support these levels, otherwise the markets are once again Frothy.. Let’s see how we do!

Have a good day!

John Kvale

8222 Douglas Ave # 590
Dallas, TX 75225 


June 2013 Review…Half Way Through the Year…Video

As we turn the half way point in the year we wanted to review what has happened and more importantly look forward to the most important items for the remainder of the year.

Bolting Out of the Gate Stretching Valuations

The S&P 500 jumped out of the starting gate once again this year. Uniquely from the last several years the reality delay was much later than in prior several years, but it arrived. The US Economy is improving, but not at the pace that market participants would like, are expecting and are pricing capital markets. Here are the possible outcomes (% marks our estimate odds):

  1. Economy picks up steam, validating capital market moves (20%)
  2. Economy stays the same most likely resulting in sideways choppy volatile action for the short-term i.e. six months (50%)
  3. Economy slows pulling markets down (30%)
YTD 10 Year Yield

YTD 10 Year Yield

Interest Rates In Control and Most Important remainder of the year

With interest rates on the rise, the question becomes how much of a headwind will rates be.  Mortgage rates (30 year)  moved quickly to the high 4% levels and in some cases 5%. Recall we experienced a huge housing increase with rates coming down to these levels from higher rates. Time will tell if this historically low, but recently higher rate creates significant headwinds for the housing market (big driver of confidence.)

10 Year Yield

10 Year Yield

Estimates coming down

Corporate Profits:

As the year started the original target earnings rate for the S&P 500 was $113-115 for the year 2013 (our estimate was $105ish and still stands),  today it is a lower $109 however the confession season coming upon us (Q2 2013) has seen a 75% decrease in earnings expectations. We think this continues.


GDP estimates at the beginning of the year by most economists were in the 3% range. Our estimates were JK 2.3% and DC 2.7% with the FOMC coming in at 2.6%, all of which seem too high now. Again this leads us to believe the capital markets are ahead of themselves.

In closing, we find it highly likely that June 2013 kicked off more normal volatility that will be with us for at least the next several quarters. Buckle up and hang on we will navigate these waters together !

Have a Great Day!

John Kvale

Bernanke Pulls the Punch Bowl….Natural Price Discovery Time

On Wednesday, June 19, 2013 Ben Bernanke announced to the world at the end of the regular two-day FOMC meeting, what we all knew would happen eventually, stimulus will slow.

Why were markets so shocked by Bernanke’s statements?

The party had to come to an end, there is no one who thought or believed the FOMC stimulus would continue indefinitely. It was truly not a matter of “if” but “when”. So markets and participants acted like they usually do, in an exaggerated manner, such the volatility.

Natural Price Discovery Begins

With companies growing profits at 3-5% and certain stock markets rising 15% this disconnect just cannot continue. Now may be the time that values come more in line with reality. We hope so, as the farther values get from reality, the worse the correction. For the record, we do not see a crash, but a move of 7-10% down from here would not surprise us.

We hate seeing lower asset prices, but are prepared

We do not like seeing assets go down in value, but extended froth is much worse. We have been expecting this for some time as you probably know (felt silly crowing as the markets moved higher) so we are well prepared.

Have a Great Friday…and oh, of course enjoy another summer weekend!summer weekend shoe

John Kvale

8222 Douglas Ave # 590
Dallas, TX 75225

Economics So bad it’s Good…April Gone

Today Big Bernanke and the FOMC gang conclude their official two-day meeting…this one, unfortunately is without press conference and explanation.  In a complete 180 of psychological events,  recent market chatter has changed from taper/ending of Cowbell (AKA Quantitative Easing) to deflation concerns….Wow!

Economic Numbers have been so bad, they are now good?

While we have crowed with a singular voice of late that the capital markets may be a bit too optimistic and earning are not “great…but good to ok” it appears we now have company as most professionals are now looking for a no-show of taper or pause talk and even bubbles of deflationary concerns are now trickling out. While we will not go that far (let’s keep a bit of an even keel here) we do feel there is continued evidence of our posture from the beginning of the year…i.e. Conservative…… Shhh….but whatever you do let’s not tell the Capital Markets as they are auto pilot to new highs…worthy or not.

April Summary and Video Out soon

Hopefully your year is not going as fast as ours, as it only seems like yesterday photowe were turning the dial to 2013. Out soon we will have ANOTHER monthly look back as April has now passed us…..maybe it is the kiddos, if so summer will be here and gone in no time. Take time to enjoy!

Have a great Day!

John Kvale

8222 Douglas Ave # 590
Dallas, TX 75225

Bernanke Signals Goodbye…….

Many including ourselves would crown FOMC chairman Ben Bernanke as one of the most powerful men/positions in the USA. At the beginning of this year the question post presidential election was….would Big Ben take the position if the opportunity presented itself, again in early 2014, marking his third term?Bernanke

Bernanke to Miss Jackson Hole for Personal Schedule Conflict…..What?

August 22-24, 2013 marks the annual Jackson Hole Wyoming retreat in which various economist and political figures meet for detailed discussions.  Just recently, Bernanke announced he would not be able to make the annual event….What??…Your kidding??? (This was not on his calendar???)

Clearly this is a signal to us that Big Ben is ready to call it quits. We do not blame him, what a taxing job with very little upside and tons of downside. Being selfish, with many more years (decades actually) of concern ahead for us….who is next up? and how will the transition go?? Dove, Hawk, Academic or Practitioner?

Janet Yellen as Bernanke Successor?Janet Yellen

The word on the street is Janet Yellen (coincidentally…the keynote at this year’s Jackson event), a fellow dove or easy monetary policy person. There is a lot of ground to cover before January 2014…but the signal at this point is clear to us…..Bye Bye Ben, thanks for the service!

Have a Great Friday and a super weekend!

John Kvale

8222 Douglas Ave # 590
Dallas, TX 75225

FOMC cool your guns! We Agree with McTeer on this one

One of our favorite local economists and former Dallas Federal Reserve Bank chair, Robert McTeer was out with an excellent comment about the FOMC actions earlier this week. (We think as an Aggie, he might be on a roll…Johnny/Heisman?) No matter, from our perch, we agree, here is why.

Today the FOMC will make an announcement after the conclusion of their final two-day meeting of 2012. We think, again, members should do nothing, as we said here, here, and here before.  This time with the afore-mentioned Fiscal Cliff pending, according to Robert McTeer which we strongly agree with,  more easing let’s our politicians slightly off the hook. “Positive measures would only help enable further inaction. ….Doing something will be tempting since the FOMC’s so-called operation twist is scheduled to expire at year-end” Agree, 100% even further more, we do not think the last round of easing was necessary, but we digress.

Not to jump on the McTeer train, but his final comment is our continued concern  “If it becomes necessary, it can be done after the 2013 recession begins.” We have long worried about taking the QE medicine in more sanguine times and what is left if something REALLY bad should happen.

Here are the diminishing results of the QE’s per chartstore.com

Chartstore Q E Effects

As you can see, each QE has resulted in less and less of an effect. Hold off boys and let the bureaucrats clear a path…We believe they can/will!

Have a great day!


8222 Douglas Ave # 590
Dallas, TX 75225

Fiscal Cliff…not beating a dead horse, but addressing the rhetoric…A sick crew and a 26.2

Earlier this week we poked fun at the Fiscal Cliff talks with our cartoon post, but after reviewing the latest popularity of the subject matter, we thought it worth a more serious discussion, even though we feel slightly like we are beating a dead horse (apologies horse lovers…only a cliche…no harm meant…haha)

Here is a google trend graph showing the popularity of the search term “fiscal cliff” that set us into motion:

12-4-12 Google Trend Fiscal Cliff Graph

We first met the Fiscal Cliff in April 2012 during our Private Client Robert McTeer talk, as he very accurately proclaimed a total failure to do anything would be a 7% negative economic drag on our economy. We are currently running at about 2%, so that would put us readily into recession territory.

What is the Fiscal Cliff?

The cliff or Fiscal Cliff, named by FOMC Chairman Ben Bernanke is the collective increase of taxes and spending cuts all at the same time, due to occur 1-1-2013. If nothing is done, tax rates will increase dramatically next year slowing our economy.

How did this come about?

Continued bureaucratic debates and compromise set this date in stone after debt ceiling, tax increase, and political compromises.

Are we concerned ?

Sure, we were concerned about Y2K too, but it all worked out. Are we running for the hills, NO WAY!

Our probabilities for outcomes:

If you have been following us long, you know we like to assign probabilities for outcomes, so here go with our blended probabilities for END OF THE YEAR actions (JK and DC…yes they are different in certain areas):

  • 10% completely resolved and everyone is happy–YEAAA–Market Positive
  • 20% Nothing gets done and we start the new year with higher taxes–BOOO–Market negative
  • 70% Extension of most everything with maybe a couple of token compromises (Can kicked down the road)–YAWN–Market neutral

What we find interesting is the US political checks and balances, at their core, were established to guide, discipline, and enhance our economy. We think it works and we like our chances/odds always! However, at this moment, the very checks and balances that were meant as guide posts are a wall that COULD hamper economic growth dramatically, but we doubt it.

Have a great day!


PS Post holiday party sickness is running rampant, we have two stomach bugs, two pink eyes and two running fever…that I know of…yikes!

PSS Sunday marks the second try at a sub 4 hour trot…mother nature looks to flex her muscles once again with higher temperatures, making it tough for a rhino!

8222 Douglas Ave # 590
Dallas, TX 75225

Puzzles ….Big Ben on stage today

One of the many enjoyable parts of this industry is the terrific fellow professionals I have met and share ideas with on a regular basis. With three study groups that I regularly visit with, all of which are fellow professionals, and most of which come from various backgrounds within the industry, insights and experiences from these think tank groups are much greater than ever imagined when first commenced . Just by chance all three of my groups have met within the last two weeks.

Given the collective thoughts from the various angles of our industry the only item everyone can completely agree on is the current economic and market environment is puzzling. Including the overseas dialogue, puzzles are our new norm, so if you are puzzled, don’t feel bad as feeling 100% confident may be slightly overzealous at best, and painful at worst.

Today, Big Ben (Bernanke) takes to the stage early afternoon after a late morning possible “more cowbell” public announcement. We again are wishful for NO MORE COWBELL, however, like Zigg our imaginary friend, we are in the minority.  Our reasoning on the subject is as more cowbell (monetary stimulus) is administered it must eventually be retrieved (money taken out of the system). If our wish comes true, we would expect volatility to go along with our puzzles, so buckle up and hang on as only time will tell!

Have a Great Day!




8222 Douglas Ave # 590

Dallas, TX 75225