Tuesday's speech by Fed Chairman Bernanke was, if nothing else, a supposed disappointment to the stock market in the U.S., and caused an earlier relief rally to sour like unrefrigerated milk.
Bernanke made no mention of any new steps the Fed might take to boost the economy. Why would he make such comments right now? The pundits on CNBC and Bloomberg TV aren't scared enough, and neither are the politicians in Washington or the average tax payer.
The Fed's $600 billion Treasury bond-buying program is ending this month. The program was intended to keep interest rates low to strengthen the economy.
The Fed chairman said the economy still needs the benefit of low interest rates. The Fed is scheduled to meet in two weeks and nobody who can fog a mirror thinks that the Fed won't keep those rates at record lows.
So here's the plan. Let more bad news hit the "fan" right away. Sure enough, the very same night of Dr. Bernanke's disappointing performance, President Barack Obama expressed concern about the sudden slowdown in the economy but said he is not worried about a second recession and the nation should "not panic."
Did you catch that hint? If the nation shouldn't panic (and no one I know or has read about has suggested it's time to panic), why would the President even suggest such a thing?
My guess based on recent history is that it's time for the Federal Reserve and The Government to begin scaring the inflation-fears right out of the American public.
It's time to rattle the nerves of the average voter so all those "public servants" we call "Representatives" and "Senators" can get behind a newly-named version of Massive Quantitative Easing.
The "word on the street" is that there's enough time between now and the next Fed meeting on June 21st for plenty of fear-mongering and emotional pandering that will open the door for yet another round of generous "fiscal stimulation".
Perhaps that's why the President used today visit from German Chancellor Angela Merkel as an opportunity to try to reassure Americans worried about high unemployment and expensive gas that the nation is on a slow, if not steady, path to recovery.
"I am concerned about the fact that the recovery that we're on is not producing jobs as quickly as I want it to happen," Obama said. "We don't yet know whether this is a one-month episode or a longer trend."
I'm hearing the theme from "The Twilight Zone" about then, yet I know this is "politics-speak" for "this might be a longer trend so the Fed best keep buying those treasuries and those mortgage-backed securities (MBS)". We don't need to buy more MBAs in this country, just more MBSs.
Either way, there appears to be little if nothing that Washington or either political party in the U.S. can do about yet another "job-less recovery" or the sudden pessimistic attitude that the major news media has about the economy.
Federal Reserve chief Ben Bernanke acknowledged the economy has lost momentum but said nothing to suggest the Fed was about to take any bold new action to further support it. Guess what? It isn't time yet for him to break that news.
When he does, watch what happens to the big financial stocks like Citigroup (C), JPMorganChase (JPM) and good, old Goldman Sachs (GS). These money "king-pins" and their peers like Wells Fargo (WFC), Bank of America (BAC) and even Morgan Stanley (MS) should be "off to the races".
Without the major banking and financial stocks participating in a broad-based rally, the stock market averages can't advance in a huge and meaningful way. The two-year old bull market would die a premature death, and that isn't about to happen.
So for the time being, as my friend likes to say, "Hold on to your shorts!" This nasty down-spell might last another couple of weeks.
But after the swooning, moaning and groaning "show" is over, be ready for some very encouraging news and a surprise announcement or two. That should be good for the other members of the Dow 30.
Even super-discounted, stodgy tech stocks like Apple (AAPL), Cisco (CSCO), Microsoft (MSFT) and Intel (INTC) which are selling at ridiculously low earnings multiples will perk up and reward their investors. It won't just big small and mid-cap tech stocks having a good ending to an otherwise lackluster quarter.
Jamie Dimon, CEO of JPMorgan Chase & Co., asked Bernanke Tuesday if he was concerned that rules from last year's financial overhaul law will take effect just as the economy is slowing. Of course he asked this because of his well-known humanitarian bias (yes, I'm joking!).
Bernanke responded that the worst financial since the Great Depression "revealed a lot of weak spots" that needed to be addressed. But he said regulators were trying to make sure financial institutions would not be overburdened with costs to meet the rules.
Did you get that sweet hint? The Federal Reserve's "children" will be well provided for and that should spawn an eventual rally in their shares that will spread across the stock market as a whole.
If it doesn't turn out that way, then may God strike me bald (check out my photo if you don't realize he already has).
The "powers behind the throne" are working their plan, and with their company coffers full-to-overflowing I anticipate a nice rally in large cap stocks by the end of the summer.
Disclosure: I am long CSCO, MSFT, INTC.
Additional disclosure: I plan on buying AAPL shares if it tests its 200-day moving average which is somewhere around $322-$324. As the rest of the correction unfolds this summer I also plan on buying a double-leveraged financial ETF like the Proshares Ultra Financials (UYG).