I’ve lost trust in the merits of antitrust regulatory decisions. As a free trade capitalist, you might expect that I would love to approve any deal. That is not the case. Some mergers are certainly anti-competitive and hurt consumers and should not be approved.

In theory, I actually support the regulatory reviews for antitrust / anticompetitive mergers. But when I look at recent cases, I cannot help but wonder where our priorities are.

Sirius and XM have been under review for about 16 months and sometimes I question whether they’ll survive before the regulators decide what to recommend. Some interests are being protected here, but I think that has more to do with the traditional broadcasters, their lobbyists and their political power than it does with the guy driving down the street trying to listen to some tunes. How about the nonsense surrounding the FTC’s desire to block the Whole Foods and Wild Oats deal for about 6 months? Cornering the organic grocery market? Oh my, you might have to pay higher prices for organic food! Did any of the regulators ever notice that organic foods were more expensive than the chemical-laden stuff sold at regular grocers before the deal was announced? Maybe they could better protect consumers and help reduce food inflation by telling their buddies in government to stop all these farm bills, crop subsidies, ethanol fiascoes, etc.

Monopoly, Duopoly or Oligopoly power is an important consideration for our government. And yet - when the average person they are supposedly protecting looks at the deal and wonders why it’s being blocked, then there is a problem. When it takes forever to get the antitrust decision announced, then there is a problem. And when some deals get fast track approval, there is a problem.

Let’s look at the merger of JP Morgan and Bear Stearns and how that was handled from a regulatory approval perspective. If Bear Stearns and JP Morgan hadn’t needed a bailout to avoid global financial meltdown, how long do you think it would have taken to approve the merger? Look at other bank mergers or how long it took to get clearance for deals like JPMorgan and Bank One when the credit markets were not in crisis mode and it’s a bit different. I know it’s impossible to expect that this deal would have had one agency of government dare criticize the “independent Federal Reserve” and their role as the broker in this transaction, but this deal needed regulatory approvals, “including all antitrust clearances from or notices to” the following: “SEC, FINRA, FERC, the FSA, the Financial Services Agency of Japan, the Federal Reserve Board, the CFTC, the DOJ, the FTC, various foreign and state securities authorities, and various other federal, state and foreign regulatory authorities and self-regulatory organizations.” (source for that quote was the SEC filings on this deal.) They managed to get all that done in a matter of weeks. Impressive…. but appropriate?

Maybe you can say that the Bear Stearns regulatory approval should have been done really fast because it would apparently have hurt consumers if it was not done. But is that the standard of the antitrust concept? Is it okay to approve a deal if it avoids a catastrophe but may lead to higher prices or less competition? You decide. But can you honestly say that the Bear Stearns merger was less important to consumers and society as a whole than something like Organic Food Retailers or Satellite Radio? In the grand scheme of things…. does anyone want to bet how many billions or trillions this rubber-stamped antitrust transaction (Bear Stearns / JPMorgan) will cost us compared to how much the failed blocking of Whole Foods will cost organic food consumers?

I’ve lost trust in antitrust.

In the SAB Miller - Molson Coors proposed transaction - here is the DOJ decision and a snippet:

“After a thorough, eight-month investigation, during which the Division obtained extensive information from a wide range of market participants — including the companies, rival brewers, beer distributors, and national retailers — the Division has determined that the proposed joint venture between Miller and Coors is not likely to lessen competition substantially.

“In one of the key parts of the investigation, the Division verified that the joint venture is likely to produce substantial and credible savings that will significantly reduce the companies’ costs of producing and distributing beer. These savings meet the Division’s criteria of being verifiable and specifically related to the transaction and include large reductions in variable costs of the type that are likely to have a beneficial effect on prices.

Eight months to decide a case about beer. Less than that month for a case about Bear Stearns. MMMMMMMM. I love cases of beer. I don’t love cases of Bear.

And sooner or later, they’ll get to decide the InBev / Bud case. They’ll probably find that the merger will save expenses for the brewers and therefore, it must mean that consumers will benefit from it. MMMMMM. I love beer. Cheaper prices means that people can afford to drink more beer. MMMMMMM - beer. All is well.

Not really, because this “approve if costs are lowered” concept seems to be the current measuring stick in antitrust approvals from either the DOJ or FTC or the FCC or the appropriate regulatory agency. The logic of this does not work too well for me. Here are some painful examples - Exxon and Mobil or Chevron and Texaco or Conoco and Phillips. I am confident that those mergers lowered costs for Big Oil, but how did energy prices do since then for consumers? NOPE - I am not suggesting that the mergers are the reason for high gas prices. I am just saying that getting antitrust clearance (like the SAB Miller / Molson Coors example) just because it “significantly reduce(s) the companies’ costs of producing and distributing” whatever product does not mean those expense savings will be passed on to consumers.

I have lost trust in antitrust.

I have been confused by the reasons for blocking some mergers. On the other hand, I don’t believe that all mergers are inappropriately approved. I just believe that it’s hard to convince me that many mergers that get antitrust clearance end up with lower consumer prices, better competition and more product innovation. I see how they usually help speculators and investors. I see how the financial industry racks up huge advisory fees. I see how these mergers often help companies save costs. I see how it helps lobbyist groups and politicians. As for helping consumers, I have don’t have much trust in antitrust.

It’s Fed Day and as you may know, I don’t care for Fed Days or any other day where the majority of investors seem to be singularly focused on what this group does or says.

Here are some past posts on this topic - note that today’s commentary (below) is a bit different, but these cover some stuff I wanted to say again.

Performance Of Fed Watching

Parse, Interpret, Spin

Who Is Signaling To Whom?

Substantial Spin

I am told today is one of those special days where the market is certain what the FOMC will do with rates and that all the smarties have already “priced it in” - apparently to perfection. UGHHH! I am not a fan of this idea that the market does such a great job looking forward or discounting everything and as for the reliability of the Fed Funds Futures trading - it is pathetic. But on this special Fed Day where just about everyone is now pitching the concept that there is no chance of a rate change in either direction - we are told it is All About The Statement. Supposedly since the rate is locked, we should all be inspired or moved by the “carefully worded statement” and divine some explicit or hidden meanings from the supposedly brilliant economists. PLEASE! PLEASE! PLEASE! Would you look at past statements from the last few years? Just click here to go to the Fed’s website.

Today, you will be barraged with a word by word analysis of what was included or excluded, whether it was too dovish or too hawkish, whether the risk to growth is equal to, greater than or less than the risk of inflation, and what all this means for signaling the next or future series of rate decisions. When you hear or read all of that crap, please think about the Fed’s past statements. Forget about how they made you feel or how they made the market feel or whether they “anchored your expectations” about rates, growth or inflation. Forget about all that sentiment bullshit. The reason for this post is to ask you to objectively evaluate what they said a year ago. Was it correct regardless of how it made you feel?

For example - how about this comment from the December 12, 2006 FOMC statement when they held Fed Funds at 5.25%?

However, inflation pressures seem likely to moderate over time, reflecting reduced impetus from energy prices, contained inflation expectations, and the cumulative effects of monetary policy actions and other factors restraining aggregate demand.

Did inflation moderate over time? Did energy prices lead to a reduced effect on inflation? And yet, at the time, I am sure many market participants (Fed Watchers) may have been impressed by the FOMC’s brilliance. Maybe even it helped to anchor those inflation expectations everyone is suddenly so concerned about.

And since I don’t want to just pick one example, how about this from the very next FOMC statement in January 2007 when they held Fed Funds at 5.25%?

Recent indicators have suggested somewhat firmer economic growth, and some tentative signs of stabilization have appeared in the housing market. Overall, the economy seems likely to expand at a moderate pace over coming quarters.

Readings on core inflation have improved modestly in recent months, and inflation pressures seem likely to moderate over time.

I am not quite sure about those “tentative signs of stabilization” in the housing market that the FOMC saw in January 2007 - are you? Again with the moderating inflation. And as for the moderate expansion in the economy over coming quarters……I missed that one. Were you comforted by this statement back then?

Please take the time to read through the past few years of FOMC statements. It will not take long but it will be worth it. You cannot just compare this statement to the words in the last statement and believe you know anything about whether the Fed knows anything. I suggest the best way to do that is to look back in time and see whether they knew anything when they made those statements.

Remember….it’s “All About The Statement” and if this is truly so important, don’t the wrong assumptions in the past statements mean anything?

Some things have real deadlines. Requiring a deadline to resolve a big problem with a “permanent” solution sounds definitive and ominous. Unless of course you are ACA Holdings (ACAH on the pinks). Their deadlines are “permanently temporary”. I have written about this $7.7 million market cap company and its relevance to the ongoing credit crisis a few times in the past (click here). June 20, 2008 was previously imposed as a deadline for coming up with a “permanent” solution to their liquidity solvency survival as part of 4 previous forbearance agreements with its creditors. At the last moment…. only 3 hours before the deadline of 6:00 pm (New York time) was set to expire…..it was extended. WHHHHEWWW! I was really surprised by that! (NOT) This is not about ACA and hasn’t been for months. In my opinion, it’s about avoiding the complications in the financial industry for all the structured credit products that ACA provided financial guarantees for. It’s not about ACA and what its shareholders have to lose. It’s about the people that have so much more to lose by finally and “permanently” dealing with this mess. Since it’s not comfortable to do that - the interested counterparties much prefer to permanently temporarily provide the fifth forbearance agreement.

I wish President Bush and the Republicans could solve today’s high oil prices by drilling. But that is not the case. Yesterday’s demands by President Bush to allow offshore drilling was not much more than a publicity stunt. It was an attempt to make the Dems look like they don’t care about high oil prices and to place the blame solely on their party for $4/gallon gasoline. And importantly, it was a fitting response for what the Democrats did last week by offering up the “windfall profits tax” legislation they knew the Republicans would reject so the Greedy Oil Party GOP would look like they don’t care about $4/gal. gasoline.

And around and around we go - it is an election year after all. This political energy isn’t about cheap oil, it’s about cheap votes. It’s about the emotions of voters and impossible promises of politicians.

Republicans are painted as greedy oilmen, haters of the environment and capitalists that don’t care about the Average Joe who needs to guzzle gas. Democrats are painted as tree hugging socialists who do nothing but block oil exploration and refining. We’ve been having this debate for as long as I can remember and where has it gotten us? Place the blame all you want - there are partial ugly truths to both political spins, but the whole truth is that oil/gasoline prices are rising and they are painful.

The time to solve today’s energy problems is NOT now…it was 30 years ago. If we had agreed to offshore drilling or in ANWR since the last time we had an oil crisis (1970’s), gas prices MIGHT be cheaper. But I am not sure by how much. If we had agreed to unlimited refinery construction, gas prices MIGHT be cheaper. But I am not sure by how much.

It is also possible that if we had cheaper oil and plentiful refining, we would have higher energy consumption and higher prices. That’s that pesky supply and demand thing again.

The reality is that drilling takes time. First - we don’t really know how much oil is in ANWR or off the continental shelf. The business and political interests that want drilling will try to convince all of us that it’s a sure thing… the mother load at some multiple of Saudi Arabian reserves. Environmentalists make sure to downplay the amount of oil and say it would only be less than a year of US consumption. Regardless of the size, geologic surveys are estimates and don’t always pan out (note the gold mining pun). Exploration takes time. Building the oil infrastructure takes time. Getting rigs in place takes time. It’s time we had in the past, and we didn’t make use of it.

Instead, the industry and politicians used the oil situation for political purposes for decades. Republicans vs. Democrats and the loser is always………..the American citizen. The Dems pushed for windfall profits taxes last time and they got it passed from 1980 until 1988. During that time, the windfall profits tax generated a whopping $80 billion in gross revenues (according to the Congressional Research Service) and while that was less than the $320 billion they originally anticipated - let me ask you - what did the windfall profits tax supporters in Congress do with the billions they collected? What new alternative energy was developed with those billions? It seems to me that we have an oil crisis right now that was not solved by the previous windfall profits tax. Having a new one is another dangerous gimmick that may work to win elections, but it will not work to lower prices.

As for all this environmental fearmongering - what examples do we have that oil drilling will ruin our environment? The most overplayed example is Exxon Valdez and the impact on the beauty of Alaska 20 years ago. But that was not a drilling disaster - that was a transportation disaster caused by dangerous sea conditions and poor piloting. I suspect that most environmentalist, anti-drilling experts would struggle to come up with a specific example of actual drilling spills. That doesn’t stop them from exaggerating or fearmongering without a factual or relevant basis.

Without a doubt - oil equipment is not pretty and many of the places they want to drill are natural wonders of amazing beauty and uniqueness. Take ANWR for example - it’s pristine and yet, when the protected land was doubled in 1980, it came with a proviso that millions of acres (along the coast nonetheless) would be examined for petroleum potential. Environmentalists try to make it seem like ANWR never was intended for anything other than wildlife - that is not true. That doesn’t mean that we should or shouldn’t drill there but try to avoid the political spin.

The environmental wing has blocked energy exploration and production for decades. They are proud of their accomplishments and more determined than ever to prevail. These tactics have contributed to (not solely caused) the global energy crisis whether they want to admit it or not. On the other hand, the Republicans and pro-drilling groups have found it way too convenient to suggest that the Dems and environmentalists are solely to blame. This is nonsense. If the Dems opened up everything for exploration, we may not poison the planet but we may not find enough oil to make a difference.

Brazil supposedly discovered a huge new oil field in November 2007 - you might want to evaluate what has happened to oil prices since then. Why would anyone assume that US discoveries in ANWR or the continental shelf would have a special effect that Brazil’s oil field could not?

And here is a big question that I have yet to hear a good explanation for - by what mechanism will oil discovered in ANWR or the continental shelf be used to lower prices uniquely in the US? I know Representative Waters (D-CA) wants to Nationalize Oil but short of that ridiculous idea, how would ANWR oil be segregated from any other barrel of oil that is globally priced? If they would be able to pull oil out tomorrow, it would be priced at market levels of approximately $135/ barrel not the $80 per barrel that Senator Obama feels is the correct price. When and if oil gets drilled there, it will be priced at whatever price per barrel is prevailing then - whether that means $80, $135, or $200+ per barrel.

Nothing we do now with ANWR or the continental shelf will help us today. Sorry to be so negative realistic. According to the studies I’ve looked at, if drilling started in 2008, we would see the first increase in supplies by about 2018. That’s not to say it isn’t the right thing to do, but it will help 10-to-30 years from now - NOT today. If you want to blame someone about $4 gasoline, point to politicians from 30 years ago and the failure of oil companies to find supply under approved leases. Blame all you want - that will do you no good and will not solve our current dilemma.

One of the great things about this crisis is that we might actually do something now. We must and it will be painful for sure. But we need to be realistic and not expect that there are easy answers for today, or this year or next year. I know most Americans are angry and I know the politicians are using this to win votes, but nothing they can do today will solve our problems. High oil prices are likely here for a long time. We need fossil fuels until we can bridge to alternative energy and transportation technologies that are currently not capable of being economically viable or cheaper than $4/gallon gasoline.

President Bush’s plan to drill wherever he wants has minimal potential to lower prices in the short term. The Democrat plans to block drilling or refining will not lower prices. Neither will a windfall profits tax. The only thing these policies will accomplish is winning votes.

In capitalism, we “make profits”. In socialism, we “take profits.”

Senator Durbin (D- IL) keeps making this comment about oil companies and their “record-taking profits.” Please watch his CNBC interview today and listen closely to the last ten seconds. You will hear….”record-taking profits”. As a part of speech, “record-taking” is being used as an adjective, not a verb.

And then remember Senator Durbin when he held court with the oil company execs a few weeks ago and said….

Is there anybody here that has any concerns about what you’re doing to this country with the prices that you’re charging and the profits you’re taking? You know, I know lots of — I am a regular person. I have got lots of friends that are regular people. And we do not like this situation any better.

In that interrogation - Senator Durbin used “taking” as a verb - like when you unfairly steal something that someone else owns.

In trading, we say “taking profits” when we refer to closing out a position and capturing the gains from a successful trade where we risked capital. Do you think Senator Durbin is criticizing how bad it is to risk capital or participate in a business where the company actually dares to make a profit? Or do you think he is claiming that oil and gasoline companies should exist for the common good and not “take profits” from the citizens that own the oil? Do you think that he feels traders have a right to make money on oil and gas trading?

I find no good explanation for Senator Durbin’s views on “record taking profits” of oil companies. I am sure that socialists feel he is right and that they get to decide which industries get to make money and how much “profit can be taken” before they complain. Be careful “making profits” - they may be taken from you.

Listening to farmers and farm lobbyists and congressmen from farming states and ethanol producers and ethanol environmentalists and food companies - you’ll often hear claims that the massive increase in food prices (especially corn) is mostly due to the rise in oil / energy costs. It’s easier to blame “big oil” than “big food”. Big Food? How about “little food” like those poor farmers? Regardless of whom you want to blame, food and oil are obviously rising quickly.

I am still waiting for when Senator Durbin (D-IL) is going to call a congressional hearing to investigate the high price of food and call in the biggest food company execs and ask them what their CEO salaries are and then ask them whether they realize that people are starving or maybe he’ll drag in the “speculators” that must be driving up prices in the agricultural commodities pits. HMMMM!?! Haven’t heard much of that and since Senator Durbin is from a Midwestern state that happens to grow a lot of food and produce ethanol, I am betting you won’t hear him going after food inflation. Instead, let’s just blame everything on the oil industry and oil industry speculators while ignoring food inflation or basic material inflation. And despite the fact that (on average) American households spend about 13% of their income on food and 4% on transportation fuel, the American consumer seems to complain more about a $15 increase in their tank of gas than a $15 (or more) increase in their grocery cart.

Maybe that will change. Let’s go with the concept that oil is a bubble and that once the politicos shame and threaten the oil industry enough, that oil will drop back to the $80 per barrel level and gas will be about $2.25 per gallon. Remember that I am playing the devil’s advocate role here and don’t believe we will see those prices any time soon. Anyway….if oil is the primary culprit for food inflation…. then if oil declines 40%, what will the food inflation blameshifters experts say food prices should decline to in response to lower oil? I doubt food prices will decline - they are sticky. We’d hear about the terrible flooding this spring and the high costs of oil when the fields were planted or when the foods were processed or any number of reasons why food prices are justifiably high.

As much as the Fed wants to manage inflation expectations with their speeches, my expectations are based upon reality. I expect food inflation with or without oil inflation.

Twenty years ago, a wise and rich businessman gave me some advice. He said… “Never believe your own bullshit.” He went on to tell me that it’s important to develop a good story and bluff in business from time to time, but it’s critical that you never convince yourself it is true. I laughed politely then and have continued laughing through the years when I ran into someone who was obviously violating the “bullshit rule.” Every time I hear someone from the Fed discussing how the risks of a slowing economy or further credit market turmoil have diminished, I wonder….did any of these people ever hear of the “bullshit rule?” And if they did, are they believing the crap they are spewing? I know Bernanke and the Fed are all about managing expectations these days and maybe they think they can talk us out of the mess we are in, but if that is what we are expecting to tame inflation or strengthen the dollar to halt the commodity pressures….we are screwed.

I used to love politics - before it became mostly a battle for power rather than a debate of ideals. One of the remaining hopes I had for the merits of respectful politics died yesterday. I cannot remember being more affected by the death of someone I did not know.

Tim Russert was a Democrat - you knew that. But when he asked a question of a Democrat - you didn’t know Russert was a Democrat. When he asked a question of a Republican - you didn’t know Russert was a Democrat.  You just knew he was a journalist that cared about the truth.   I used to respect journalism for the important role that it provided to present the facts and perspectives of our culture. That was before the news became so increasingly political - regardless whether the topic is political.

One of the remaining hopes I had for the merits of factual interviews and dissemination of information died yesterday. There were no softballs to promote a political agenda - either his or his guests. There were no beanballs to promote a political agenda and harm the other side. Russert not only asked the toughest questions - but he asked the questions that needed to be asked. There was no opportunity for guests to escape with lies of omission. He did not accept non-answers or dodges or bullshit responses. He listened to answers and followed up. The words and the tone from Russert were precise and they left little option for lies. And on the rare occasion that someone tried pulling off an untrue statement - it would haunt them if they ever reappeared on Meet The Press.

Russert loved politics and reporting it for all of us. He was so prepared and knowledgeable on so many topics that I couldn’t help but compare….Russert vs. the guest. Which one would I rather have answering the questions? Tim Russert. Values, ethics, intelligence, listening, diplomacy, respect, leadership,…name a quality you would want in a politician - the qualities that are so lacking in our “leaders”. Tim Russert had all those qualities. I had thought about which candidate I plan to write in for President - Tim Russert would have been a great choice.

I can hear Russert saying - “it’s a great, great day.” But it isn’t - not for his family and friends….not for American politics….not for journalism….not for America.

Here’s a snippet from KeyCorp’s most recent 10-Q  filed on May 6, 2008 for the period ending March 31, 2008.

Capital adequacy. Capital adequacy is an important indicator of financial stability and performance. Key’s ratio of total shareholders’ equity to total assets was 8.47% at March 31, 2008, compared to 7.89% at December 31, 2007, and 8.37% at March 31, 2007. Key’s ratio of tangible equity to tangible assets was 6.85% at March 31, 2008, above Key’s targeted range of 6.25% to 6.75%. Management believes Key’s capital position provides sufficient flexibility to take advantage of investment opportunities, to repurchase shares when appropriate and to pay dividends.

In that same filing, they said their Tier 1 capital was 8.33%.

Only a month has gone by since Key’s last report, but a lot has changed. Here’s a summary of their decision on June 12, 2008 to cut the dividend in half and raise $1.65 billion. The press release (click here) indicates that an adverse IRS ruling of about $1.2 billion caused management to pursue this capital. I don’t think the market that whacked the shares by over 20% believes them that this is the sole problem with capital. Raising $400 million extra with highly dilutive offerings might be one clue. Cutting the dividend by 50% to save $200 million per year might be another clue.

I doubt that management still believes what it believed just a month ago that their “capital position provides sufficient flexibility to take advantage of investment opportunities, to repurchase shares when appropriate and to pay dividends.”

I have written repeatedly about my dislike of buybacks when they are done for the wrong reasons. Okay, so Key didn’t buy any shares in the last two quarters, but they bought 16 million shares in the first 3 quarters of 2007. Back then, the stock traded between $31 and $40 per share with an average of about $35/sh. Not only were those purchases expensive compared to today’s $11.73, but wouldn’t it be nice to have the $500-600 million in the capital they spent on themselves? Was that a good opportunity to “repurchase shares when appropriate”?

So what about their dividend policy decisions? They raised quarterly dividends in 2007. In 2006, it was $0.345/sh. In 2007, it was $0.365/sh. And they raised them a few months ago to $0.375/sh. Small raises really, but raises nonetheless. They had to (I guess) to keep up their record of 43 years of consecutive dividend increases. After one quarter and a one-time tax ruling, they decide to cut dividends by 50%. So much for the record.

Key is not alone. Many banks have spent their capital in prior years on buybacks and dividends and expensive acquisitions (aka “investment opportunities”). During that time, stocks were heading higher and there appeared to be no downside. Now, the reverse is true.

I know people far smarter than me have assured everyone that the worst is behind us. They apparently know more about the key to capital than I do.

I don’t believe that “jawboning” or “moral suasion” works - especially not more than a day or two. Besides - the jawbone powers of President Bush or Chairman Bernanke or Secretary Paulson aren’t quite comparable to Samson - the real “strong man”.

When President Bush tried to jawbone OPEC into increasing oil supplies to reduce oil - how did that work out and for how long?

When Paulson said “strong dollar” policy over and over for the past several years, we got continuous devaluation.

So forgive me if I am more than skeptical about the jawboning powers of Chairman Bernanke in his attempts to fight inflation or lower oil prices via strengthening the dollar by uttering a few words.

Actions….not words. Evaluate the actions for the past few years - they have not created confidence and directly led to dollar destruction and inflation. Now, in their infinite wisdom, the guys who contributed heavily to this mess with failed monetary and fiscal policies and who cheered the wonderful impacts of a weak dollar to support our exports, have decided that a crumbling dollar isn’t good for our economy. BRILLIANT!

On June 2nd, Bernanke said the Fed was going to be “attentive” to strengthening the dollar. One whole day after Paulson had definitively stated (for the gazillionth time) that he “strongly favored” a “strong dollar”. I am sure he had a “strong” look on his face as he “strongly” pounded the table and used “strong” volume in his voice. No one “strongly” cared about Paulson’s promises in the past or June 10th on Bloomberg when he said he would tell his G-8 buddies this week that the “strong dollar” would be representative of “strong” economic fundamentals. Okay. Got it.

But as for Bernanke - his jawboning appears to have worked. On June 2nd - it worked for about 3 days. The dollar went up, oil went down and commentators were convinced that he and the Fed would singlehandedly jawbone the oil / inflation into submission. OOPS. That failed so this week on June 9th, Bernanke stepped it up again and said “The Federal Open Market Committee will strongly resist an erosion of longer-term inflation expectations, as an unanchoring of those expectations would be destabilizing from growth as well as inflation.” That has worked too - at least 4 days so far.

Actions…not words. Evaluate the actions he is taking now and opening his mouth does not qualify as an action. Do you really think that currency traders are bidding up the dollar because they believe what Bernanke says is true or will be true? I don’t. I think they just look at his jawboning as an opportunity to make a trade that they can undo when it fades in a few days.

After all the jawboning - the dollar has appreciated about 1% since June 2nd and oil is up $10 per barrel. As for expectations of inflation - mine haven’t changed despite Bernanke’s words. They have changed because of his actions. Actions…not words.

Before getting excited about Fed Funds rate hikes being good for the dollar and for the fight against inflation, please consider the rationale for the rate cuts and whether they worked. Monetary theory says that all the easing since last fall should have boosted the economy. Last time I checked - wages are declining, unemployment is rising, consumer confidence is dropping, etc. etc. I missed the part where the Fed’s prior actions have solved much of anything other than contributing to inflation and a weak dollar. As you may have gathered from my prior posts about the Fed (and Central Banking in general), I don’t feel it is effective and it can be very counterproductive. More importantly, I am increasingly concerned about the reliance on Central Banking decisions to dictate the sentiment of market participants.

As for all this jawboning about the strong dollar - it is a lame attempt to “strongly” convince people that oil will go down if we can just “strongly” talk it down through “strong dollar” talk. Actions…not words.