I was going to follow-up on last week’s column where I talked about the flaws with trying to mimic filings hedge funds make with the Securities and Exchange Commission. I used David Einhorn as an example for the article. However, a stock he just purchased is being bought out at a 20 percent premium. According to Bloomberg, Einhorn made $63 million on this one stock. So, I want to focus on another topic instead.
Presumed Republican presidential candidate Mitt Romney has been running an awful campaign. Anyone who watched John McCain’s presidential campaign in 2008 would think Romney is trying to mimic it. It almost seems as if Romney wants to lose. Additionally, no one knows where he stands on most issues, especially the economy. However, this week Romney probably made the smartest statement so far.
In a highly unusual statement for a presidential candidate, Romney stated that he would not re-nominate Federal Reserve Chairman Ben Bernanke if elected president.
This comes at a very interesting time. There is increasing speculation that the Fed will launch another round of quantitative easing (QE). The issue has become a bit political, but even many Democrats are opposed to it. Einhorn, who considers himself a centrist Democrat, attacked any further easing actions by the Fed in a rare guest post by the famous hedge fund manager.
QE is basically an attempt to get banks to lend more. Its results have been mixed since the first round was undertaken in 2009, but nearly everyone agrees that QE leads to speculation and increases in commodity prices and the stock market.
Many experts stated recently that Bernanke would not launch a third round of QE before the elections in an attempt to appear apolitical. Now Romney has put Bernanke in a trap. If Bernanke launches QE3, it will look like he is backing President Barack Obama. Furthermore, Romney will have lots of ammunition to accuse Bernanke and Obama of raising oil prices and food prices. With the recent drought, people will not be happy with even higher food prices and oil at the pump. Even if stock prices increase, most people will not feel an immediate effect.
This puts Bernanke in a very awkward position. If he launches QE3, Romney can go on the attack for the Fed being political and raising inflation. If he does not launch QE3, which could be seen as due to Romney’s pressure, the economy will not receive its boost of steroids. This will be bad for the economy in the short term, but help the economy in the long run.
If the economy is not doing well by Nov. 6, it will hurt Obama.
Maybe Romney is starting to learn how to run a campaign finally.
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