I Think I'll Reflect On The Federal Reserve...

If you've got an extra 75 minutes on your hands and want to learn about the origins and mission of the U.S. Federal Reserve Bank (and who doesn't?), then you should definitely tune in to the Fed Chairman's four-part lecture series at George Washington University.

Ben Bernanke delivered his first lecture to a business class called "Reflections of the Federal Reserve and its Place in Today's Economy" today (March 20) and the Chairman is scheduled to lecture again on March 22, 27 and 29 from 12:45 - 2pm Eastern time (10:45am to 12:00pm for us in the Mountain zone).

I watched today's live stream and was definitely not bored, nor did it feel totally over my head.  Having just heard about it this morning on the radio, I obviously didn't do the assigned reading - and I'm not sure that I will - but Mr Bernanke did a great job of covering the "Fundamentals, History, and Principles of Central Banking" in a way that even someone in a flyover state like me could understand.  ;)  He was a university professor for several years, after all.  A pdf of his PowerPoint presentation and the recorded video of his lecture (when it's posted) is available on the Federal Reserve's website, here.

The Fed Chairman's lectures make up the first four sessions of a spring term course at GWU that is being professionally recorded, probably at taxpayer expense.  All ten sessions will be taped and should be posted to YouTube, but the final six will not be steamed.  I am definitely going to try to watch at least the first four with Mr Bernanke, and maybe even try to keep up with the reading.  The Federal Reserve and its role are something that I think most people, myself included, don't know much about, and I would certainly like to understand better.  Also, this course could serve as a little reminder of what being in school is like, in the event that I do eventually decide to go back.

[Okay, so I wrote this post on Tuesday afternoon, but then the computer peed all over itself and I couldn't actually publish.  Today (Wednesday) I did the aforementioned reading, and I think I have decided to try to stick with the course.  This is going to cut into my new-found "pleasure reading" time, but the more you read, the better you get at it, right?]

Also, The Evolution of Bernanke’s Beard is awesome.

Side note... I highly doubt that the links to these videos and resources will be any good after this class session (in the case of GWU) or Mr Bernanke's time as Chairman (in the Fed's case) are over.  All of the videos should end up on YouTube, and with any luck will stay there, but the class syllabus will probably be replaced with next year's version.  I've uploaded the basic html of the syllabus page to my public Dropbox folder, so it should be available for a little longer if anyone needs to find it.

What does the market think your house is worth?

As off-the-wall as I think Glenn Beck is most of the time, it'd be a lot easier to not like him if he didn't make so damn much sense.

In this video from February he explains (with the help of a gigantic graph!) the historical price of houses in the U.S., adjusted for inflation, of course, and finds that they tend to stick around $100K. You can ignore the parts with Obama, if you'd like; they really don't affect the analysis.



Now, I haven't independently confirmed his figures, but they do seem reasonable, and if the trend line he draws actually continues like that, we're totally boned. I don't personally think that prices will continue to plunge like they have been, but we were long overdue for a major correction in housing prices.

Happy Columbus Day, Dow Jones!

Holy cow, Dow! After last week's slow free-fall of the world wide markets, the 10%+ gains in Europe and Asia overnight seem to have kicked a little life back into the U.S. markets today.

The Dow Jones Industrial Average closed up nearly 1,000 points (well, 936.42 or 11.08%) to close within sight of 10,000 again after its largest daily point gain ever. The S&P 500 soared 11.6%, the Nasdaq Composite Index rose 11.8% and the Russell 2000 jumped 9.2%. Who said that last week's dips were a buying opportunity? I won't make you guess; it was me.

But don't get too excited. As the Wall Street Journal reports today:

Despite Monday's massive rally, many Wall Street veterans remain on the lookout for a grinding period of weakness in the global economy and stocks in the months ahead.

"The danger here is that people will be lulled into the idea that a strong bull trend is now in place rather than the idea that the market is just bouncing off a short-term oversold condition," said Michael Darda, chief economist at MKM Partners, a trading and research firm in Greenwich, Con.

They continue:

Doreen Mogavero, president and chief executive of the New York floor brokerage Mogavero Lee & Co., said she's still looking for a round of capitulation, or last-ditch selling to pave the way for a more sustained rally. While there were some hopes that Friday's intraday market low, including a nearly 700-point decline for the Dow, would mark such an event, she believes there wasn't enough volume behind the selling to confirm it as a true capitulation.

"At best, I think we're looking at a short-term bottom here," she said.

So basically, if you're one of those who couldn't stand the heat last week and jumped out of the frying pan, you may have really ended up in the fire after today's up-surge. But only time will tell where the real bottom is and when the real recovery will happen.

Less than Happy Anniversary

Crap.

The stock market's collapse accelerated Thursday as bank lending remained stubbornly clogged and investors remained unwilling to hold anything except cash and government debt, no matter how tiny the returns for doing so.

The Dow Jones Industrial Average declined for a seventh straight day, plunging 678.91 points, or 7.3%, to 8579.19. Blue chips last dipped below the 9000 level five years ago. Thursday's fall was the Dow's third-worst all time in point terms and 11th worst in percentage terms. During its recent losing run, blue chips have fallen by a startling 20.9% and are down 39.4% from their record high, which was hit exactly one year ago. (WSJ, 9 Oct 2008)

All that basically sucks, but it doesn't look nearly as bad when you look at the (really) big picture...It doesn't look quite as bad.

Personally, even though my 401k is probably getting hammered in the rear right now, I've got long enough before I need to draw from it that this decline in prices is basically a buying opportunity. Not a pretty one, but even though my value has gone down, my buying power has increased significantly!

Also, crude oil prices fell to their lowest point in eleven months today, to under $87 a barrel, but gas prices at the pump haven't kept up the pace:

The last time oil sold for $87-per-barrel was October 2007, according to the U.S. Department of Energy. But current gas prices nationally and in Phoenix remain more than 60 cents higher than last October.

The national average stands at $3.40 per gallon, well above October 2007’s $2.77, according to AAA. Phoenix-area average prices stand at $3.27 per gallon compared to $2.65 a year ago. Current prices, however, are down from summer highs of more than $4 per gallon. (Phoenix Business Journal, 09 Oct 2008)

I don't know why that is, but I don't like it.

And further proof from the WSJ that the stock market operates purely on emotion and speculation, not hard data:

Strategist Jim Paulsen, of Wells Capital Management in Minneapolis, said the fear that has seized the market lately may be an unintended, self-fulfilling consequence of recent efforts in Washington to pass a $700 billion rescue of firms saddled with illiquid mortgage securities.

"To sell the bailout to the public, everyone from the President on down had to go out and tell people how bad everything was, that the world was coming to an end," said Mr. Paulsen. "Ever since, people's expectations about the economy have gotten worse and worse and worse, and their reaction to each new action to fix the problems has gotten worse and worse and worse."

Oh well. Remember, buying opportunity!

**In other news, I might have to figure out how to be Freddie Mac for Halloween. :D

Damn, Dow!

Well, Congress' $700 billion tax-payer-funded "rescue" of the U.S. credit markets doesn't seem to have had the desired instantaneous positive effects that some predicted. The Dow Jones Industrial Average took a swim below 10,000 points for the first time since October of 2004 and crossed into territory that it first broke back in April of 1999 (when I was a junior in high school!).

Luckily, today will not be remembered as the first close below 10,000 since 2004, because the Dow rallied at the close to at 10,000.34 points, down 303.85 points (2.94%) on the day.

But before everyone goes blaming President Bush and / or John McCain for this calamity, remember these two things: Barack Obama voted for this thing as well; and turning around the tight credit market is not like parking a VW Bug, it's more like U-turning an oil tanker - these things take time.


Update: D'oh! Apparently, in the time it took me to type this, some final numbers came in, and the DJIA did not, in fact, close above 10,000. It came to rest at 9,955.50, down 3.58% on the day. But at least I'm not alone - the Wall Street Journal had to change their website headline, too.

This week on the web

Here's a mish-mash of stuff that I accumulated over the past week that I mean to blog about, but never got the chance. I may have to start doing this every week, or at least when I think about it. It's kinda like James Taranto's Best of the Web Today on WSJ.com, but not daily, and quite a bit less clever. I may have to start doing this every week, or at least when I think about it.

Still uncomfortable with Obama and his elitist arrogance? You're probably just subtly racist. (link)

Steve Tobak explores the alternative-energy bubble on CNet news. "What, you don't believe that there's an alternative-energy bubble? Then you're just not paying attention." (link)

"With [Moqtada al] Sadr's 'retirement,' we've taken another long stride" towards a irreversable victory in Iraq. (link)

"Coffee Served Right" (wing) at the Conservative Café in Crown Point, Indiana. "Latte-swilling liberals welcome, too." (link) & (link)

"China breaks Olympic promises on rights, media, pollution" -- Are we supprised by this? (link)

Busweiser (Anheuser-Busch)'s takeover by Belgian InBev may have been motivated by European corporate taxes that are nearly half of what Anheuser-Busch payed in America. How does that happen?! (link)

"Suddenly being green is not cool any more" in Britian. (link)

Well, there ya have it. I read and posted those articles, so I think they're probably worth a little bit of your time to read. If you have some time, that is.

Can your afford it?

The saying used to go, "I can't afford to vote republican," but given Barack Obama's stated presidential goals, such as spending an additional $65 billion a year of American taxpayer money ($2,500 a year each) to "cut worldwide poverty in half," a wholly unrealistic goal in the first place, it would be much more realistic to sloganize, "I can't afford to vote Obama."

Read the IBD's series on Obama's ideas here.

Whoops, didn't see that coming!

I'm not real big on over-regulation and bureaucracy, especially when said regulation is rooted in pragmatism and short-term appeasement of some advocacy group's gripe. That's why I was pleased when I came across this interesting and well written column from the Freakonomics blog back in January examining the unintended negative consequences of several well intentioned laws.

Here are a couple of gems:

"...when the A.D.A. was enacted in 1992, it led to a sharp drop in the employment of disabled workers."

and

"...economists make the argument for 'the distinct possibility that the Endangered Species Act is actually endangering, rather than protecting, species.'"

I recommend you read the column. It's pretty short and doesn't really assign any blame, it just explores a little bit.

Economics, Beer, and a New Sexual Identity

Just a short roundup of what I thought was cool today on the Internets:

**Battle of the Sexes: Dr Lott examines why our government has gotten so big.

"What changed [regarding expansion of the federal gov't] before Roosevelt [and the 'new deal'] came to power that explains the growth of government? The answer is women's suffrage."

**NY Times names my favorite beer, their favorite beer!

"Still, our No. 1 bitter was an American brew, the beautifully mellow Sawtooth Ale from Left Hand, which I felt was a dead ringer for a British bitter right down to the gentle carbonation."

**The Daily Mail knows what women want: a "Retrosexual" man.

"Gone is the metrosexual man, now women have been demanding the return of the real men, like Indiana Jones."

Enjoy!