Sorry Ben, No Confidence Then and Less Confidence Now

All you need is ignorance and confidence and the success is sure.
-Mark Twain

Ben Bernanke has hit the speaking circuit with his first post-Fed speech in Abu Dhabi, where he commanded a cool $250,000. The former Fed chair used to earn $199,700 a year, so by the time he wraps up his schedule this week, he will have pocketed three years worth of cash. I have no beef about the cash. I wouldn't knock the hustle, but many will say he'll now go around the world being paid by people that banked big cash, while he was the world's chief money printer. More important than knocking the hustle (I do speaking engagements for a lot less), I was fixated on a couple of his comments.

Ben Bernanke says the Fed could have been more aggressive, and I am thinking they have thrown in the kitchen sink and all the plumbing.

Then there was his observation that: "the United States had become overconfident" as it went headfirst over the cliff in September 2008. People were feeling good, especially those buying and flipping homes, but in general the nation was mostly in an indifferent state, with official readings on confidence being well below levels seen at the peak of the stock market bubble.

The Fed was overconfident and flat-footed. Moreover, the truth is Ben Bernanke was overconfident and Janet Yellen was blind. He misjudged urgency at the start of the financial crisis, while the new Fed chairwoman missed the biggest housing bubble ever concentrated in her neck of the woods. Imagine leaving your house today and you happen to notice a beanstalk in your front yard, which went up and up and up until it reached the clouds. Would you hop in your car or would you call your son, Jack, to find out what happened on his visit to the store?

I happen to believe Mark Twain was on to something when he said, "All you need is ignorance and confidence and the success is sure." In fact, it's truer now than ever before. One has to be ignorant about the statistics, the critics, and the overall economy, and go out there and make it happen. Confidence has to come from knowing you will do the work, make the sacrifices, and find the answers. The fact of the matter is it has been a long time since America has felt this way. The nation never recovered from the tech bubble implosion, even as the housing bubble made everyone feel a little better. Ironically, the Dow came all the way back and established new highs, without any fanfare.

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Confidence?

I think not only those that somehow thought the nation was on autopilot, would have used those words; I think sanguine is a better description and while I misjudged the magnitude of the crash, I was frustrated that a half a dozen years of solid earnings were not reflected in equity prices. Still, this is all about the Federal Reserve and how well-connected it is with Main Street. This is about the Federal Reserve and its ignorance based on faulty assumptions and arrogance of power. This is about the guy, who printed more money than all the other dudes combined saying, they could have printed even more.

Say what?

I wish the Fed did not exist, as their mission is to prop banks and the government; and if somehow that cash trickles to the rest of us, then so be it. The risks taken and the damage to the reputation of assets, like the stock market and the housing market, have emboldened the spending of this profligate administration, negating any would-be positives. Nevertheless, the Fed is here to stay (even its harshest critics have backed away from calling for its dismantlement), and while we have someone with the reputation of being a printer at the helm, I am more concerned in the future with turning off the spigot.

In the meantime, Main Street confidence isn't coming back anytime soon. The nation is mired in a lack of self-confidence and loathing. The economy is crawling back on muscle memory and against headwinds that call for more regulation and taxes each morning; like a religious call to prayer. Sadly, there is no sure fervor over-trusting the nation and its businesses to step up to the plate, and to continue that free market tradition of wealth creation, job creation, and confidence creation.

There is another saying about ignorance being bliss. Consider the cloud of pessimism in this country. I welcome ignorance-driven bliss, except in the halls of the Federal Reserve.

Beige Book

What an appropriate name for the Fed's regional survey of business and economic conditions. It was all modest or moderate, or stable, and everyone blamed the weather. This is the cloud of cover that will buy Yellen more time to stay true to her dovish ways. I still think the market wants to see tapering each time the Fed gathers.