oh baby please dont let me be misunderstood (update)

Hope you had a Marx Free May Day ,

It wasn’t the protests, it wasn’t the price at the pump, it was the “money honey” Maria Bartiromo and her confession that FED Chief Ben Bernanke felt his testimony last week had been misunderstood and that he had not intended the markets to infer that the incremental rate raises of the last several years was just about done. The market immediately went from positive to negative. Readers of this blog will note that for some time I have been pushing the point home that if the FED stops the markets goes, if the FED holds the line and continues the same we should expect the same. I can not emphasize enough that the rate increases have keep the market in check. Meanwhile the economy has expanded, corporate profits have ballooned and consumers have spent yet the markets have simply not responded. The key ingredient is the FED tightening cycle. The market often takes the” he’s guilty until he proves himself innocent “of any new FED Chair. Mr. Bernanke is no exception and simply under a microscope for any and everything he does.

The Iranian government continues to play the oil card, but for the most part the market is taking it all in stride. Interest rates seem to be the primary dynamic controlling the direction of the market. The fear now is that after settling down the economy has regained momentum rising renewed fears of, inflation is coming, inflation is coming. This one if by land two if by see inflation mantra seems to be wearing a little old for most investors ,but to many old timers the specter of an inflationary spiral is a process where by, a little bit of inflation leads to a little bit more and so on, till we are revisiting the dreaded Carter years. What you may be wondering is weather the trend of enormous productivity growth we have witnessed the last 5-6 years will continue? I certainly think so and this is why, as new technology continues to become disseminated and more and more people begin to understand how to implement and use new technology to improve their lives, the effects of these changes on the work place generate huge changes in the way we all live and do business. This process is beginning to create significant life style changes. These changes are keeping a lid on inflation so far and I think they will continue to do so for the near future.

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And finally no email would be complete with out mentioning energy prices ,folks I would suggest stop complaining about gas prices and buy energy stocks, it is really that simply.

James
www.jamesfoytlin.com