• 3 days Banking Stocks Could Be Set For Another Bumper Year
  • 4 days Crypto Mining Migration Continues As Bans Line Up
  • 5 days The Meme Stock Craze Could Lose Out to Crypto
  • 8 days Banking Sector Booming As Stock Market Lags
  • 9 days Has Bitcoin Stopped Bleeding? Some Analysts Seem To Think So
  • 9 days Amazon ‘Competitor’ Charged With Crypto Fraud Scheme
  • 10 days As Competition Heats Up, Cable TV Mega-Merger Revived
  • 11 days China’s Road To Tech Independence
  • 16 days 3 Major Bearish Catalysts For The U.S. Economy In 2022
  • 18 days VR Industry Boomed During Holiday Season
  • 18 days 3 Global eCommerce Brands Have Overtaken Amazon
  • 19 days Another Banner Year for Billionaires
  • 23 days Top 3 Predictions For Bitcoin In The New Year
  • 25 days China Moves To Tighten Rules For Companies Looking To List Abroad
  • 26 days Fake Reviews Go All The Way To The Top
  • 32 days Airlines Want The Government To Ditch Emergency Testing For Covid-19
  • 33 days The Service Robot Industry Is Booming
  • 37 days The 3 Biggest Market Risks In 2022
  • 40 days Fintech Valuations Have Grown Red-Hot
  • 47 days DIDI Delisting Is A Worrying Sign For Investors Holding Chinese Stocks
Jes Black

Jes Black

Jes Black, hedge fund manager at Black Flag Capital Partners, specializes in foreign exchange and global macro trends. Prior to organizing the fund he helped…

Contact Author

  1. Home
  2. Markets
  3. Other

Bernanke Put? Maybe Not

In this morning's Financial Times we said Bernanke's appointment would reinforce the idea of a "Greenspan put." But this is easier said than done with real yields at all time lows.

Greenspan's put worked during a 20-year period of disinflation when rising productivity then the China phenomenon drove "core" prices lower. Now headline inflation is spilling into core rates and that will put a policy of targeting core inflation directly at odds with the so-called "Bernanke put."

The main reason a Bernanke put is unlikely to work is that long term yields adjusted for gold are turning up from all time lows. This leaves little wiggle room for the new Chairman (top chart) to soothe the markets as Greenspan has so often done.

If Bernanke is to be as successful as the Maestro, he will have to pull off a Houdini to put gold back in the bag.

With the spread between gold prices and bonds at record highs (bottom chart), the 30-year yield should be above 6%. This is likely to happen now that headline inflation is spilling into the core rate. Therefore, we think targeting only "core" inflation won't work like it did for Greenspan and would thereby neutralize the effect of any "Bernanke put" the equity markets are wishing for.

Recall that gold began to rally sharply in 2001. Now note that the Gold/T-bond ratio (bottom chart) had moved perfectly in line with the 30-year yield for two decades until the very month Mr. Bernanke gave his now famous "helicopter money" speech. The reason is that Bernanke's speech lacked the assurance that a Fed could combat a drop in the market without increasing inflation expectations.


Back to homepage

Leave a comment

Leave a comment