Shooting the Messenger

“Every time he opens his mouth, the market tanks.”

That’s what I kept hearing during yesterday’s market sell-off.

“He” is, of course, Ben Bernanke, the poor guy who had to follow in Alan Greenspan’s hallowed footsteps as Chairman of the Federal Reserve.

Under Bernanke, the Fed has raised interest rates precisely twice. Under Greenspan, the Fed raised rates fourteen times. But, under the twisted laws of Human Nature, Bernanke is Guilty as Charged. His crime: spoiling the party.

Now, Greenspan raised rates fourteen times because he had previously dropped them to virtually zero, triggering the greatest home-building speculation boom in the history of the country. Al figured—and with his reputation in Washington, who was going to argue?—the Fed could gently deflate the Greenspan Housing Bubble in a way that everybody would win.

But Bubble aftermaths are never pretty.

Just look at the last one. It occurred only five years ago, when Greenspan himself tried likewise to gently deflate the greatest new-era business speculation boom in the history of the country—the Greenspan Internet Bubble—and triggered a recession.

So, who’s the villain here? A guy who tells the world inflation is running a little high and maybe rates aren’t necessarily going down any time soon?

Or his predecessor, whose twenty years in control led directly to $70+ oil, $300+ copper and $600+ gold? Now, I’m not a Greenspan-is-Satan Conspiracy Theorist, although I have friends who are entirely convinced that “Easy Al,” the Fed and various “Powers that Be” have cynically manipulated markets in everything from U.S. stocks to U.S. Dollars to Japanese bonds and Saudi oil policy for their personal and political gain, for the last decade at least.

(I’ll never understand why, if the Fed can do whatever it wants, Saudi Light isn’t at $2.00 a barrel instead of $72 and the Dow isn’t at 110,000 instead of sloshing around 11,000?)

As far as the economy, Fed policy, the Dollar and interest rates are concerned, ‘it is what it is’ and, as investors, we have to deal with the facts as they are, not as we might wish them.

And this Benanke-bashing seems like plain old messenger-shooting, the kind practiced by insecure CEOs who blame their stock price declines on short-sellers, and voters who say they want “plain talk” but then won’t vote for anybody who tells them anything like the truth about things like taxes and why they’re still paying too little for unleaded gasoline and home heating oil.

Ben’s got an impossible job: following a legend. Just ask Jeff Immelt at GE how he likes having every move he makes compared with Jack Welch, or Sam Palmisano at IBM how he likes being compared to Lou Gerstner. Even the Great Greenspan got off to a rough start back in 1986, after he took over from the Legendary Inflation-Killing Paul Volcker. Or has everybody forgotten what happened in October of 1987?

Jeff Matthews I Am Not Making This Up

© 2006 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.