Registered Investment Adviser Caleb Lawrence
After opening lower on disappointing but not overly significant data the major averages recovered some of their early losses to enter the final hour mixed.
Import prices fell .2% in June pushing the year ago figure down to just 1.5%, a 4th consecutive decline primarily driven by weakness in petroleum and related product prices. Export prices slipped for a second month down .2% in June. The year ago rate fell to just .6% a 3rd consecutive decline.
Federal Reserve chairwoman Janet Yellen’s recent statements that there would be no new financial crisis in her lifetime, is all but certain to come back to haunt her. Aside from another glaring example of elite hubris it also serves to underscore the myopic nature of central bankers when it comes to preventing financial catastrophe. A recent piece by Bill Black of Savings and Loan Crisis fame took Mrs. Yellen to task on the subject noting that in 1996 as president of the San Francisco Federal Reserve she penned a piece on The New Science of Credit Risk Management, extolling the virtues of VaR or Value at Risk and the wonders of derivatives to hedge risk. Mrs. Yellen went on to note that these newfangled strategies justified allowing the banks to take greater risk and lower their capital requirements as well. Another item of note is her blindness to the Nobel Prize winning article published by her spouse George Akerlof titled “Looting” that looked at the deregulation, desupervision, and de facto decriminalization that led to the environment that spawned the 2007-2009 financial crisis, an environment that exists to this day. The rest “as they say” is history, but if ever someone was wide of the mark by a country mile it would be Janet Yellen who demonstrated a tenuous grasp of central banking then, while her most recent statement that there would no new financial crisis in her lifetime shows that she still doesn’t get it, or perhaps just plain doesn’t care.