Market Talk

Let’s poke the bull, shall we?

David Rosenberg, the Gluskin Sheff analyst who’s been one of the stalwarts of the contrarian camp through this massive bull rally, takes his analytical scalpel to the testimony of Fed Chairman Ben Bernanke yesterday, and finds if wanting:

Ben Bernanke made a statement yesterday that cannot go unchallenged, with all deference to his IQ and brilliance as an (academic) economist. To wit: “it appears to us that the recovery has made an important transition from being supported primarily by inventory dynamics and by fiscal policy towards a recovery being led more by private final demand.” What is he looking at? The chart below shows that this goes down as just about the weakest recovery ever in terms of real final sales growth, which has essentially been non-existent in per capita terms. Private payrolls grew in May at one-fifth the pace posted in April, it looks to us as if consumer spending stagnated for the second month in a row in May, and mortgage applications for new home purchases have sunk to a fresh 13-year low.

As for Mr. Bernanke’s notion that the economy is off life support, well, it’s time for him to climb down from his ivory tower. Food stamp usage just soared to a new record high — 40.2 million persons or 18.5 million households receive benefits. How is it possible that spending is going to drive the economy by any meaningful pace with so many people clearly in some stage of duress?

On the Street, this is called talking your book, and Washington has been doing it forever, no matter what the facts on the ground say. Remember the phrase “well contained”?

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Never let it be said that we don’t work our tails off here at Market Talk to get you the news. We have in our hands an advanced, embargoed, exclusive copy of Goldman Sachs chieftain Lloyd Blankfein’s testimony to the Senate Permanent Subcommittee on Investigations, which he will deliver later today.

It took the work of secret couriers, an indigenous Vietnamese agent named Co Bao (“You weren’t expecting a woman, were you?”), one Groucho Marx disguise, and a punk staffer in the Senate who’s shorting the testimony, but here — finally — we got it:

“The issue here is not whether we broke a few rules, or took a few liberties with our in-the-dark counterparties; we did.

“But you can’t hold a whole bank responsible for the behavior of a few sick, perverted individuals. For if you do, then shouldn’t we blame the whole banking system? And if the whole banking system is guilty, then isn’t this an indictment of our financial institutions in general?

“I put it to you, Carl Levin! Isn’t this an indictment of our entire American society? Well, you can do what you want to us, but we’re not going to sit here and listen to you bad-mouth the United States of America! Gentlemen!”

Oh, wait, that’s Eric Stratton’s testimony. I guess we don’t have Lloyd’s after all.