“On the 4th day of Chanukah, Bernanke gave to me: Continued eternal QE…”
The Federal Reserve’s latest bond-buying plan is far from a watershed moment.
FORTUNE — While the rest of the world prepared to shop till they drop for Christmas, Fed Chairman Bernanke was indulging in the playful Jewish tradition of the season, known as Chanukah Gelt — “Chanukah money.” Each day during the Festival of Lights, parents give small amounts of money to their children. The children take the cash and proceed to gamble it away playing Dreidel – the Yiddish word for a spinning top – a game in which a four-sided top is spun and the players either win or lose their bets, depending on which letter of the Hebrew alphabet comes up.
This is a particularly apt metaphor for the press conference Bernanke held on the fourth day of Chanukah last week. As Hedgeye’s Keith McCullough put it in his Early Look note the morning after:
Educating yourself to contextualize this moment in economic history is one thing – having common sense is entirely another. Bernanke admitted yesterday that his entire policy framework is based on forecasts that you should have no confidence in. Finally, I think global markets actually took his word for it on that. To review Bernanke’s 2012 experimentation (actually he called them “innovations” yesterday, and smirked):
January 25th, 2012 – right when Global Growth was accelerating (I was as bullish as anyone in the world on the prospects for US and Global Consumption growth on JAN24), he arbitrarily decided to move his 0% interest rate Policy To Inflate out to 2014 from 2013. Stocks and Commodities ripped for the next month, then topped.
September 13th, 2012 – after whispering sweet bailout promises to whoever got the memo (other than me) from Jackson Hole, Bernanke pushes his 0% interest rate Policy To Inflate out to 2015 and beyond. Stocks and Commodities continued to rip for another day, then topped.
December 12th, 2012 – whoever was front-running the Fed’s latest “innovation” (knowing he’d move to “targeting” an unemployment rate that you may not see until 2017-2020) didn’t even stick around for the full press conference. Stocks and Commodities topped, intraday!
After perpetuating all-time highs in Housing, Education, Oil, Gold, and Food prices (2006-2012), he pushed out the 0% rates 3 times in 10 months, from 2013 to 2017 and beyond. Each time, the market rallied less (for less time) on less volume.