How We Learned to Stop Hating Fed Tapering

Headline shock may be fading as we head into Fed week. On the cover of this week's USA Today's is an article titled "Fed May Reduce Bond Buying." It's not a revelation and a long way from "man bites dog," but last week such a headline might have sent early morning futures down significantly. Instead, this morning equity futures have been noticeably higher. The mitigating factor in this particular article is the notion Ben Bernanke will assuage Wall Street concerns and make sure everyone understands monetary policy will be nimble and fluid—able to move in both directions depending on developments.

I continue to think this is a giant mistake. The Fed trying to keep Wall Street calm is akin to parents buying their fat child candy to stop him from whining. Let him whine and let the Street complain. These are the same smart guys that tipped the scales into disaster and the same smart guys playing catch up to an amazing rally that the experts should have seen coming based on history, valuation and other factors known as fundamental research. Now, the idea is to ignore Main Street and the end results of all the money printing to keep a bunch of crybabies happy?

Don't do it Ben!

On the flip side, we all must step back and consider all that accommodation to the US economy and how little it moved the needle. Our debt continues to pile up and the Fed's balance sheet has stretched well beyond limits many thought impossible just a few years ago. I think there are only two choices for the Fed at this point.

A) They stay the course and buy paper, and keep rates at almost zero until earlier targets including 6.5% unemployment rate are achieved. I sincerely think the Fed is prepared for their own version of new normal—a balance sheet of three trillion dollars. It's too early to drop this on the markets but not hard to imagine when being honest about fiscal policy and real risk to our economy—hint, it's not a risk the economy is prepared to gallop ahead with reckless abandon. 

B) The Fed understands it must reduce its balance sheet, but waits for the right signals of an economy ready to handle day to day rigors and challenges without steroids. If that's the case, then it's too early but once the Fed makes its move it doesn't look back. Flip flopping would be a giant mistake eroding the already thin amount of credibility the Fed is holding onto now. 

What the Fed ultimately does remains a mystery, but the good news is knee-jerk reactions to tapering of unprecedented asset purchasing might be fading, and that means we can focus on the right things—finding great companies that have undervalued stocks based on fundamentals and potential. I would say to Wall Street they should try this sometime. 

Meet Real Gangsters

The G-8 gathering happens this week in Ireland and probably couldn't have come a minute too soon for President Obama, whose administration has been peppered with scandals and unanswered questions about spying on citizens and gathering information without warrants and without scruples. Many say it's just Chicago style politics, otherwise known as gangster politics. There's no doubt they are ruthless in Chicago, but this week the biggest gangsters in politics anywhere are going to be in Ireland pushing various agendas, and I doubt America will get anything it wants nor put the kibosh on those sitting in the room.

I just don't think President Obama is a match for Vladimir Putin who took a Super Bowl ring from Robert Kraft, owner of the New England Patriots during a visit to Russia. Here's Kraft's account of the encounter from today's New York Post:

Kraft explained the incident happened while Sandy Weill and other business execs were in St. Petersburg. "I took out the ring and showed it to [Putin], and he put it on and he goes, ‘I can kill someone with this ring,' " Kraft told the crowd at Carnegie Hall's Medal of Excellence gala at the Waldorf-Astoria. "I put my hand out and he put it in his pocket, and three KGB guys got around him and walked out."