Chairman Bernankes Big Day

Today in Atlanta Ga Federal Reserve Chairman Ben Bernanke will give a widely anticipated policy speech on the condition of the U S economy. The stock and commodity markets have sold off for 5 straight weeks on less than healthy economic numbers and anticipation of the end of the feds six hundred billion dollar, second round of Quantitative Easing. Market Participants will eagerly await and markets themselves will move on the slightest change in verbiage or hints of future direction.

So what should you be listening for and what are the implications? I will be paying close attention as to whether The Chairman sees the recent spate of terrible economic, housing and employment reports as a transitory bump in the road or a more pressing concern requiring more dramatic Federal stimulus. Chairman Bernanke has already expressed a strong desire to reinvest interest payments on and proceeds from maturing securities into the markets. Although further action by the Fed is unpopular with many of the current Fed Governors,my inclination is that Chairman Bernanke plows ahead with some form of additional easing or stimulus. This is for several reasons. As a widely noted scholar of the Great Depression, I feel the Chairman's greatest fear is deflation, and he does not want to go down as the individual who let the U S and the global economies slide into a double dip recession. Be aware that either choice is fraught with peril. Do nothing and you risk backsliding into a global economic morass. Additional Fed action risks further debasing the U S Dollar sparking greater inflation in the commodities that hit consumers the most mainly food and energy. With the Price of crude oil currently at almost $100 a barrel and Gas at the pump hoovering around $4.00 a gallon, this is a tight rope walk at best.

The implications for the individual are equally great. The hint at last summers Jackson Hole WY economic forum of more fed easing or QE II sparked an almost parabolic rise in equities(read your 401K) and commodities(read the price of gas at the pump). Expect markets to chop around the flat line until the tea leaves are read on the details of each and every utterance form The Chairman this afternoon.