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Who’s Got the Ball?

June 8, 2012 – 5:01 pm

The week gave us better economic news than we have had for several weeks though it in no way can be considered strong. A leading economic indicator, the weekly unemployment claims, fell a few thousand, always a helpful sign, but the more important four week average rose a few thousand. Producing jobs is a strong headwind for this economy and that is retarding the advancement of stock prices. There does not appear to be any help coming from our politicians. In the Q and A session this week with congressional members, Bernanke said the Fed is ready to step in if need be with a possible QE3. He also said that anything the Fed does will be muted without the Congress and the President stepping up their efforts. He in particular is concerned about the end of the year expiration of certain tax regulations which the popular press has called the fiscal cliff.

In other words, Ben Bernanke is throwing the ball back onto the politicians to do something because the Fed has been doing the majority of the work carrying the ball for many months. The problem is that anything the politicians do will impact the coming election. Of course being perceived as doing nothing is also a danger for those running for office. The voters are not going to be pleased with either situation. They want the politicians to do something but what that something should be is unknown. One thing is certain: they certainly do not want the delicate recovery we have to get worse and doing nothing about the fiscal cliff will definitely make the economy weaker.

Good Trading
Steve Peasley

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