The Fed Wants Inflation

Yesterday, the Fed said it was prepared to move on new
stimulus if the economy weakens further. What’s more, the Fed’s statement
that inflation is below levels it wants to see suggests that further easing
is coming. That’s a clear indication that the Fed is still worried about
deflation.

I suppose it’s a good sign that the Fed held off on new
easing action. But the Fed also failed to sound a confident tone about the
economic recovery, which I think is mistake.

Of course, we know the economy isn’t great. But most
economic data has improved over the last month or so. And it should be
understood that there is no magic bullet that puts millions of Americans back
to work. It’s going to take time, re-training and probably some government
incentives.

What Yen Intervention Means for Gold

Last night, Japan
did something it hasn’t done since 2004. It sold yen to push
the value of its currency lower. A weaker yen helps Japanese exports and is a
tool for fighting deflation in the country.
Japan officials didn’t say how much yen they
sold, but it drove the dollar 3% higher against the currency.

As we know, a stronger dollar will push oil prices lower.
And it will affect stocks, too.

Japanese stocks are up 2% across the board. We’ll see if it
affects
U.S. stocks to that
degree. Declines are likely to be short-lived as the market adjusts to the
yen intervention. This will be the dip to buy for investors who missed the
start of the current rally.

What Intel’s Earnings Mean for You

Intel’s blowout earnings report last night is certainly
making it look as though earnings estimates were revised too low for
corporations. And so the overwhelmingly pessimism that drove stocks lower
since early May seems to be shifting to optimism that maybe things aren’t
that bad after all.

Intel’s second quarter EPS were $0.51 on revenue of $10.8
billion. Those numbers crushed the analyst expectations. Analysts wanted
$0.43 with $10.3 billion in sales. Guidance was also way above expectations.
Intel’s management expects third quarter revenue of $11.6 billion from $11
billion.

CEO Paul Otellini made sure to let analyst know during the
conference call that this quarter was the best quarter in the company’s 42 year
corporate history.