Is Ben Bernanke Incredibly Smart or Just Stupid?
There is always the overhang of Europe and its fears over sovereign debt; one minute the market is up by triple digits and as soon as Spain sneezes, investors start to lock in gains. Can we expect Bernanke to do his job and look after Europe? Should we ignore corporations' improving balance sheets?
Blaming Bernanke just doesn't make a whole lot of sense.
These same corporations continue to guide cautiously -- particularly those with European exposure. We saw this recently when Cisco(CSCO) reported a beat on both the top and bottom lines, yet the stock got hammered because it opted to do the right thing and tread lightly.
Cisco reported earnings of 48 cents per share -- topping analysts' estimates of 47 cents while representing an increase of 14% from the 42 cents it earned in previous year. The company reported net income of $2.2 billion or 40 cents per share on revenue of $11.6 billion -- topping net income of $1.8 billion or 33 cents per share for the same period last year.
So what was the problem? It guided weaker than expected.
Absent in all of this is an acknowledgment that had it not been for strategic monetary policies and fiscal leadership from Bernanke, companies such as Cisco would still be slashing budgets and shedding jobs instead of the demonstrating growth. While Bernanke's focus remains on the overall health of the economy, there is a direct correlation with the health of corporate earnings.
For that matter, the economy is still growing at a respectable rate. As much as investors continue to clamor for QE3, the fact that it has not happened -- presumably because it is considered unnecessary -- should serve as evidence for what a great job our Fed Chairman continues to do.
What's more, the fact that his interest may not appear to directly align with yours affirms why he continues to be the right person for the job and deserves more credit from investors than he has received over the past couple of years.
At the time of publication, the author held no position in any of the stocks mentioned.