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Fedspeak as Balm for Investorsby Colin Gustafson
When the chairman of the Federal Reserve, Ben Bernanke, speaks tomorrow about mortgage foreclosures, pay attention to his words. Fedspeak is a language of its own, as lawmakers saw when Mr. Bernanke presented a stark picture of the American economy to Congress last week. His testimony was padded with "understatements, spin, and happy talk," the blogger Barry Ritholtz writes (http://bigpicture.typepad.com). But while Mr. Bernanke's words may seem to understate the economy's dire condition, Mr. Ritholtz believes that the Fed chiefs "dollops" of sugarcoated truth are exactly what skittish investors and traders need to hear. The alternative — a bluntly worded account of slowing growth, rising prices, and the sinking dollar — "would send the market into a panic," Mr. Ritholtz writes. "The Dow would see a 1,000 point intra-day drop." To prove his point, the blogger offers his own, tongue-in-cheek revision of Mr. Bernanke's recent congressional testimony: "Gentleman, this is a major problem. And our internal, non-public projections forecast it is only going to get worse for the next four quarters." If this were Mr. Bernanke's testimony, be sure a repeat of 1987's stock market crash would not be far behind. In reality, Mr. Bernanke called the situation "distinctly less favorable." But "just imagine," the blogger writes. If he "told the full and unvarnished truth, it would be beyond ugly."
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