Bernanke to markets: "No soup for you!"
That seems to be the way Wall Street is digesting the unusually unambiguous comments made by Fed Chief "Helicopter" Ben Bernanke.
The trouble for Wall Street is that Mr. B. seems very disinclined to throw more gasoline onto the equity fire that's been burning ever since Alan "Big Bubbles" Greenspan turned on the fire hose to bail out the U.S., after the dot-bomb explosion left a new generation of bagholders bloodied and looking for a new bubble.
Bernanke's not living up to his nickname -- the one he got by reportedly saying he'd rather toss money out of helicopters than see deflation. While Ben's steadfastness may be a surprise to all those Porsche-driving Wall Street types, it's no surprise to me. (The Street's amusing denial used to be my only surprise, but even that's become routine.)
After years of unsustainable inflation, the housing bubble needed popping, and Bernanke surely noted that Fed rate cuts did little to slow that mania. It wasn't until the garbage loans began to stink that the inflationary pressure from home-flip mania began to be reined in. The way I see it, the hot money is in stocks for a while, not only because that's the easiest place for the average Joe to look for returns, but also because of the misplaced faith that the Fed will soon be opening the money spigots once again.
Bernanke's splash of cold water on that notion seems to have sent stocks down across the board, with companies such as ADP (NYSE:ADP), Big Lots (NYSE:BIG), DuPont (NYSE:DD), MasterCard (NYSE:MA), McDonald's (NYES: MCD), and Altria (NYSE:MO) shedding a percent or more.
It's worth noting that the Fed chief says he thinks the economy will fare just fine. And it might, but that doesn't mean stocks are guaranteed to continue their good ride. If inflation -- especially in real stuff, like gasoline prices -- continues to take a bite out of consumer spending, it might not be enough to dump the economy. But it could be more than enough to put an end to the peak earnings we're seeing these days.
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At the time of publication, Seth Jayson had no positions in any company mentioned here. See his latest blog commentary here. View his stock holdings and Fool profile here. MasterCard is a Motley Fool Inside Value recommendation. Fool rules are here.
