What Will Bernanke's Press Conference Mean for Commodities?
Following today’s Federal Open Market Committee meeting, Ben Bernanke, the Federal Reserve Chairman, will host a historic press conference.
You see, the Chairman is not a PR specialist. He’s an economist. He’s a banker. He’s the soft-spoken squirrely guy who sat in the front of your math class and said nothing, but aced all the tests.
I have to iterate: this is the first press conference following a policy meeting – ever. That’s nearly 100 years of stoney-silence, broken.
So you have to ask yourself: what the hell does it mean?
Well, when the economy is humming along, unemployment is low, growth is good, but not too good, deficits are in check, and the dollar is healthy – you don’t hear a single word from the Fed Chairman. He’s like that old saying about children, except he’s not heard, or seen.
If he’s putting himself in front of the cameras, fielding questions and generally making himself heard and seen, then the only logical conclusion is that he’s in damage control mode.
Or maybe he’s getting in front of a big story or a horrendous calamity that we don’t yet know about.
In any case, it’s probably not a good sign for anyone who owns Federal Reserve Notes (FRNs) or assets dominated in FRNs.
Heck, even if you’re investing in commodities, you should pay attention this afternoon. Ben Bernanke wields immense power to severely damper any trend over the short term.
Over the long term, his power diminishes.
But over the long term, we know that FRNs are doomed. So are the assets dominated strictly in FRNs.
Most of my work in this letter, if you think about it, has been to help you deleverage yourself out of your FRN position.
Yesterday, for instance, I told you how to ditch the dollar to buy the Chinese renminbi.
I write every week, if not every day about the importance of owning physical gold and silver bullion. That’s the classic FRN deleverage move.
But even buying commodity stocks is a dollar deleveraging move. Despite the fact that the overwhelming majority of publicly traded companies are bought and sold with dollars, buying these companies still gets you out of the dollar today. You will be able to sell them later for many, many more dollars – hopefully more than enough to make up for inflation.
I’m not saying you shouldn’t have any cash. Having cash on hand is the best way to make sure you will be able to take advantages of crisis opportunities when they come.
But most of us, me included, have way too much exposure to the downside of FRNs. If you’re not making moves to get your portfolio out of harm’s way of a potential continued debasement of FRNs, then it’s going to be extremely difficult to be richer tomorrow than you are today.
It will even be difficult to be as rich tomorrow as you are today.
So my advice would be to watch Bernanke’s press conference today with an eye not for panic or conspiracy theory, but for opportunity.
If Bernanke does or says something drastic enough, it could push some of our favorite commodity assets momentarily down in price.
You should be able to watch the press conference on any major cable news network. It’s supposed to start at 3:15 EST. I know I’ll be watching.
Good investing,
Kevin McElroy
Editor
Resource Prospector
