So, I tuned in on Ben Bernanke’s speech today up on the University of Michigan’s campus. As opposed to many of his previous speeches, Bernanke was far more at home and had quite the jovial demeanor. I would attribute this to the fact that he used to teach Economics in a similar setting years ago. Anyway, here’s the gist: inflation low, unemployment getting better — not where it needs to be (around 6%) and Quantitative Easing (QE) will remain in play for a bit.
Bernanke says that the short-term interest rate is close to zero, and that the Fed is now in the world of nonstandard policies. The Fed has to pay very close attention to the costs and risks of these policies.
Translate: The Fed is having some inner issues as to how best proceed on QE Policy. Some of the Fed Governor’s are quite vocal in their disliking QE and especially in its third round. I tend to agree with them. You can only put money out at near 0% interest for so long; the bond purchases by the Fed from the US Government only encourages Washington’s Drunken Sailor Spending Spree.
What I was greatly encouraged by was Bernanke’s subtle, but obvious distancing of himself from Washington and the Beltway and positioning himself more as a mediator to the markets. Why is this important to the Contractor? Well, as Investors begin to see some guidance (without political manipulation) they are going to more aggressively invest. With more investment comes more rehab and renovation.
Translate: More investment monies will come into play allowing purchase of foreclosed properties in anticipation of the Fed backing off Quantitative Easing. This, in turn, means more work for the Contractor whom has aligned and equipped themselves properly.
In closing, I think we are beginning to see a new public image around Bernanke and I also believe that we are going to see this translate into some confidence in the Markets. I am going to get a primer up later this week about this for the layperson over in the Industry Insider Section.