If Federal Reserve Chairman Ben Bernanke were a baseball player, I doubt he would be very good. He may be able to drift around the minor leagues, but clearly, he’s not “big league” material. I surely wouldn’t have him as a manager or bench coach either.
As some of you know, I love the game of baseball; hey, it’s America’s favorite pastime after all. Yet there are more similarities between baseball and the stock market than you would think.
In my previous commentaries, I discussed the concept of adopting a “small ball” strategy in the stock market—that is, going for strong companies and consistency rather than betting the farm on a penny stock and hoping to hit it out of the ball park.
So when I was sitting there the other day watching the Red Sox play, it dawned on me that Bernanke is like a baseball player who just can’t seem to win those big games.
Let me explain.
Bernanke is like the lead-off hitter. Think of his QE1 strategy as a base hit. Better yet, he gets hit by a pitch and gingerly trots to first base. The fans go wild. (Of course, the fans represent the stock market.) They get excited and clap in a frenzied state.
But then the second batter strikes out. Call this the gross domestic product (GDP) growth.
The third batter strikes out looking. This is the jobs market.
Now, with two outs, comes the clean-up hitter, and the fans go nuts; Bernanke is jumping up and down, leading off at first base.
Unfortunately, there’s another out (call this the mounting national debt), and Bernanke is left with nothing to show for him getting hit by a pitch.
The fans are disappointed, but continue to cheer the team on. The stock market is also doing the same in spite of the poor returns of QE1.
Of course, Bernanke comes up to bat again with QE2 and, again, the same thing happens: he gets hit by a pitch. The fans are disappointed, but continue to support the team.
Bernanke now wonders what he needs to do and so decides to try again with his third at bat by buying bonds with QE3. But once again, despite getting to first after getting hit for the third time in the game, it’s the same old triple nemesis (GDP growth, jobs market, national debt) that prevents him from scoring. The fans, like the stock market, continue to cheer louder but without substance—the team lost.
Heck, Bernanke is failing to drive growth and the stock market continues to rise.
Ironic, isn’t it? But that’s okay. Bernanke will soon be leaving the big leagues.
~ by George Leong, B.Comm.
This article was originally published at Investment Contrarians