McDowell Bests Woods, Bernanke Explains Monetary Policy

Monday, December 06, 2010

Tiger Woods Graeme McDowellGolf is fun to watch again

Tiger Woods is back...almost. For the first time in 2010, Tiger looked like the competitive, hungry player of the past. Granted, he was playing in the Chevron World Challenge, an 18-player event sponsored by the Tiger Woods Foundation and not an official PGA tournament, but he looked good. He took Graeme McDowell to a play-off after letting his 4-shot lead to start the day disintegrate by missing a couple key putts early. McDowell eventually bested Woods showing iron resolve by sinking two long putts on the 18th green to finish the round and on the playoff hole.

Woods' struggles this year are clearly the result of the incredible psychological damage he did to himself. Yet, his psyche seems near repaired after a year of wreckage in his personal life. He has also spent the year working on a new swing which looks to be coming together nicely. The results are a fitting end to each player's season with it being Tiger's worst year and McDowell's best as professionals. McDowell climbed 32 spots in the world ranking, from 39th to 7th, while Woods slipped from 1st to 2nd as Lee Westwood nabbed #1. I think the event sets the stage for a much brighter 2011 for Woods and I loved feeling the thrill of a dead-heat finish to a tournament that only Tiger is able to create.

Strong week after Monday reversal

The S&P climbed 3% last week with futures trading at new highs for the year pre-market on Friday prior to the release of the dismal jobs report. Monday's significant reversal off the lows of November's pullback set the stage for the massive buying that stepped in on Wednesday and Thursday. The reaction to Friday's jobs number can really only be perceived as bullish as equity buyers used the weakness to snatch up shares.

It's tough to spin a report of 39,000 jobs added when economists expected 150,000 and private payroll increases only came in at 50,000 versus 158,000 expected. Even the unemployment rate ticked up from 9.6% to 9.8%. There just really wasn't anything positive in this report.

Yet, stocks reversed and closed strong with the excuse seeming to be that QE2 makes for a heads-we-win, tails-we-win scenario. I think though that the market is staying somewhat optimistic as companies continue to increase profits. Adding 39,000 isn't great; in fact, it doesn't even meet the ~110,000 needed to compensate for new workers entering the labor market, but it is still job growth. The recovery is a slow slog but we're still adding jobs, we're still growing, we're still on the right track, modest as it may currently be.

Bernanke explains they're not practicing witchcraft, it's just monetary policy

Ben Bernanke appeared on 60 Minutes last night in his second public interview to explain the FOMC's viewpoint and actions. Bernanke did a great job laying out the mandates of the Federal Reserve and quelling some of the fears surrounding their policy initiatives. Bernanke made the case that with unemployment at ~9.5% much of the year and inflationary pressures very modest, the correct course is to ease monetary conditions further. He points out that the risk of non-action could be far greater. Bernanke also tries to put to rest the warnings of inflation from many pundits by arguing that the Fed has a diverse set of tools to deal with inflationary pressures if and when they crop up. Importantly, he stresses that his policy are not fiscal in nature, they do not add to the national debt.

The FOMC's mandate is to balance the goals of full employment and stable prices. When unemployment is high and inflation is very tame, really the only choice the Fed has is to pursue expansionary policy. The Fed has a long history of fighting inflation and should be able to rein it in if inflation rises above their 2% target. For now, the slack in the system will inhibit producers from passing through costs of rising commodity prices driven by global demand. I applaud Bernanke for his appearance and would like to see more reasoned and rational discussion on the benefits and risks of monetary policy. There is simply far too much hyperbole when it comes to discussing the subject.

Brandon R. Rowley
"Chance favors the prepared mind."

*DISCLOSURE: No relevant position.
blog comments powered by Disqus