Monday

Economic Data is Very Punk These Days

I don’t see the taper happening. The minute he mentioned taper and it was this negative reaction in the bond market, negative reaction to stock market, as you and your listeners would know there was recant after recant the next day. “Oh, well, people misunderstood Dr. Bernanke. He didn't really say that,” and of course, subsequently he said, “Well, you know, we could taper. We could also increase buying of bonds depending on the economical data.”

In my mind, the economic data is very punk these days. I mean, retail sales were up 0.2 percent last month. They were up 0.1 percent the month before. The labor numbers were awful for the last month. Not only did we not have many jobs, the average hourly earnings went down. The average work week went down.

It was one of the most brutal reports I've ever seen in my life. My own analysis of what’s going on is we have created a situation in the States where we’re replacing full time employees with part-time employees, and pretending that it’s a job gain. But the reality is that the total income of workers is not going up at all. So, I don’t see taper happening.

If they did taper, I think we've seen the worst in gold from the taper talk. Now, gold’s going to live its own life here, based on other fundamentals that are going on. Then, of course, you and I can talk about those fundamentals. So, I think it’s going to have its own determination based on things other than taper talk, or buying extra, fewer than 10 billion bonds in a month.

I don’t see that as having any impact. I think the biggest impact might be if they actually tapered. They said they were going to do it, that rates might just keep going up here, and, of course, that would be an awful economic development for everyone. The stock markets would come under pressure, and the bond market, of course, would come under even more pressure than the crash that we've already had in the bond market.