Fed Doesn't See Double Dip, Housing Starts Up, Markets Rally

        For one day at least, the market saw enough green shoots to rise over 100 points in the Dow with similar gains on the S&P and Nasdaq. While there's a lot of speculation about what Bernanke will or won't do, at least he says he sees no double dip:

       "At this point we don't see a double dip recession. We see continued moderate growth. But we are very committed to ensuring, or at least doing all we can to ensure, that we continue to make progress on the employment side. And we have stated that we are prepared to take action as needed to try to make sure that we see continued progress on employment."

        http://www.cnbc.com/id/48224583

        He seems determined to make a liar out of Sumner and friends by insisting that he is no superman and the Fed can't fix all problems. He seems very preoccupied with the fiscal cliff.

       "The collective impact of the tax increases and spending cuts together come something close to 5 percent of GDP, which if all hit at the same time would be very negative for growth. It is important to combine a more gradual approach with a longer term plan to address the sustainability (issue)."

        I notice though that everyone kind of sees in the fiscal cliff what they want to see. Dick Cheney thinks it's the end of the world as all he cares about are war games, so the idea that there could be mild military cuts-which we could use-is Armageddon. It's amazing that the House GOP is so interested in being seen in public with Darth Vader himself.

        Romney was with him at a fundraiser recently and allowed no pictures so Obama can't do some ads with nothing but the picture of the two embracing.

        Bernanke-also a Republican, sees the expiration of the Bush tax cuts as the end of the world though we had a much healthier economy in the pre Bush tax cut era than the post Bush tax cut era.

        The Democrats should not let anyone spook them on this including Bernanke.

         In other good news, housing starts were very health again, which would seem to validate Bernanke's cautious optimism:

         "Groundbreaking on new U.S. homes rose in June to its fastest pace in over three years, lending a helping hand to an economy that has shown worrisome signs of cooling.

         http://www.cnbc.com/id/48223504

         This has been what we've seen lately-housing, which was, of course, the problem that got us here, is now clearing up. It has remained healthy in the face of weakening in other parts the economy.

          "The Commerce Department said on Wednesday that housing starts rose 6.9 percent last month to a seasonally adjusted annual rate of 760,000 units. That was the highest rate since October 2008. "

           Still, there is a glut problem so let's not overdo it:

           "The U.S. housing market, which collapsed six years ago, has been a relative bright spot in the economy this year, although it remains hobbled by a glut of unsold homes."

            Indeed, Bernanke said there is modest improvement, not phenomenal. Although everyone I talk to sees no bullish case for the banks, I remain intrigued. The bank earnings so far have been good. True a lot of this seems to be beating on EPS but not on revenue-not a good sign.

            What gets me though is Bank of America-who also beat, though the stock dropped. It had actually reached $8 before it's beat but is no back down at $7.55 or so-where it was when I first started saying I'm intrigued.

            I really still see it as a low risk deal. The point of dwb-a low price may just mean low quality-but the low price has me thinking there's very little down side to it. At $7.50 what's the real downside risk? I don't see it getting creamed again to say the $5 level it was at during 2011. If you do what I do-if I had money-and buy up maybe a $9 call for August or maybe the $10 call for September-or go for say $12 or $13 next year, and the price of 10 calls-my formula for trades it to buy cheap puts or calls-it would be cheap. A mild move can get you far.

          Or maybe what you want is to go in at $8 for August if it's not too expensive. On the other hand I see very little risk if you do simply buy and hold. If in 2 years the economy is back, surely Bank of America will have doubled if not considerably more than that by then?

           Anyway, there's some sign Bernanke may be right. Best of all, Obama's chances are getting better and better. If you understand American politics at all, Americans don't vote for unlikable candidates-Romney is upside down on favorability-and they like alpha males. That's why Bush won in 2004. They don't vote for guys who get bullied. I see almost no path to victory for Romney. It's actually when he does "go on attack" that it gets worst. For him, it seems to basically mean "going Birther."

         This tactic may not be his style-to his credit. But, you listen to Rush and Sean, et al, and that's where he's being pushed. See Sununu's absurd comments about Obama's admitted youthful drug use.

         In the end even if Romney is not really a fan of this sort of thing it's all he has left.

         P.S. The fact that Americans tend to go for winners is demonstrated by how the ACASJC.