Blog : Green Eggs and Ham

by Ed Zwirn on November 13th, 2013

Look for the U.S. Congress to (regrettably) once again take center stage Thursday, with the commencement of Senate hearings into the confirmation of Janet Yellen to succeed Ben Bernanke in January as head of the Federal Reserve.

What many had hoped would be prove a rare example of a key administration nominee getting a quick (and painless) nod may in fact prove more nettlesome than that, being that Sen. Rand Paul, a Republican from Kentucky with libertarian leanings, has said he would try to block Yellen from a vote unless he gets an up-or-down vote on his bill that seeks to audit the Fed.

Even though Paul has conceded that he probably won't be able to muster the votes to defeat the nomination, there is a good chance that tomorrow will see ideological attacks (maybe we'll get to hear another Green Eggs and Ham recitation) on the U.S. central bank, which has been blamed in some circles for much of what is wrong in the Land of the Free.

More importantly, investors in everything from penny stocks to blue chips are likely to get whipsawed by temporary market gyrations, as senators try to pin Yellen down on specifics of monetary policy, particularly her thinking on when the Fed should begin to scale back on its $85 billion monthly bond purchases. The Fed tea leaf readers will go into full prognostication mode based on any nuances the likely next Fed chief is forced to cough up as senators, acting upon popular sentiment that the whole monetary policy game is rigged anyway, try to pin her down on specifics.

But specifics will be hard to come by, given the conflicting signals going out about the direction in which the U.S. economy may be headed.

At first glance, many people viewed the jobs report which came out Friday as a game changer signaling an abrupt pickup in the labor market. After all, the number of new jobs added to the economy in October came to 204,000, more than twice the consensus forecast, after what most of us had thought was a dismal August and September.

But, as I pointed out in an earlier penny stock blog, revisions announced Friday showed that these previous months were not as bad as had been originally announced, which means that the October number signaled not a resurgence, but a continuation of the slow recovery of the labor market.

Look for further labor market clarity on Dec. 6, when the government puts out its November jobs report. This will be followed by the last Fed monetary policy announcement of the year, on Dec. 18, presumably Bernanke's swan song. These two milestones will come too late to help Yellen through her Senate ordeal, but just ahead of the next possible showdown over government operations and debt financing.