Weak Dollar Wednesday – Bernanke’s Grand Delusion

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If you think your life is complete confusion
Because your neighbors got it made
Just remember that it’s a Grand illusion
And deep inside we’re all the same. – Styx 

Oh my God, I have run out of doveish metaphors to describe the Fed.  

Like Austin Powers seeing a mole – all I can do is say dove, Dove, DOVE!  Bernanke used his farewell speech last night to actually turn into a dove, fly around the room and poop on the Dollar, saying: “EVEN AFTER unemployment drops below 6.5%, and so long as inflation remains well behaved, the Committee can be patient in seeking assurance that the labor market is sufficiently strong before considering any increase in its target for the federal funds rate.”

The OFFICIAL unemployment rate is just 7.3% and we’re about 6 months away from seeing 6.5% – even if things go splendidly in the economy (and the Government doesn’t shut down again in January) but the broader U6 unemployment rate is still more like 14% and ShadowStats calculates the actual unemployment rate (of actual people who want jobs but don’t have them or people who want good jobs and have crap jobs) is more like 24% in the US, so we are miles and miles and miles and miles and miles away from 6.5%:

What the bulls should be concerned about is the LACK of reaction Bernanke’s commentary is now getting. I attribute this to the fact that this amount of QE is more than fully baked into forward-looking market expectations and without MORE FREE MONEY (not same), there’s nothing for the markets to get excited about.  As I said to our Members in early morning Chat:

Put it this way:  You are underwater and you are running out of air and you will drown if you don’t get some so people bet you are going to die and your stock goes down.  

Along comes the Fed and gives you oxygen and you feel better and you won’t drown so your “stock” rises back to levels it was at before you started to drown.  

The Fed keeps giving you oxygen and some people keep investing in your stock as if you will keep getting stronger and stronger until your stock is so high that you would have to win the triathlon to justify it, but both you and the Fed KNOW that the minute they take away the oxygen, you will simply begin to drown again…  

The BEST case is you get back out of the water (out of trouble) and no longer need the oxygen – but that still doesn’t magically make you a triathlete, does it?