Here I Stand

Here I Stand

Sunday, May 1, 2011

Ben Bernake and Apple

Last week saw quite a jump for almost the entire market – despite the rather mediocre news from Fed Chairman Ben Bernake. We are seeing quite a bit of confidence in stocks, with the Dow at a three year high, and especially in the tech field. Many tech giants, especially those into the ever growing smart phone market have seen significant jumps in revenue over the past year, and Motorla and HTC, running Google's Android operating system, posted great first quarter numbers. The big winner though, is Apple. No real surprise there, as the iPad and iPhone have been trend setters in the techie world for years. This quarter though, Apple posted a net income of nearly $6 Billion, and was just crowned the second most profitable company in the world – right behind perennial giant Exxon Mobil.

This hot streak may be slowing down though. In his speech Friday, Bernake stated that keeping the fed interest rate near zero to fight off inflation, would also risk hurting job creation, and the recovery of our still fragile economy. Whether the current rates have been doing a decent job in their fight against inflation is another matter altogether. The dollar has dropped, and with that, the price of everything goes up. Oil, energy, food, everything. The current tensions in the Middle East (or should I say the perpetual tensions) don't help the situation much either. With gas averaging $4.22 last week in Orange County, CA (where this is being written from) we cannot help but see an increase in prices across the board. Company's need gas to function – to get produce to market, to get supplies, to deliver goods, everything in business revolves around fuel prices, and whether the Fed wants to admit it or not, inflation is playing a factor. Comodities are up across the board, and there has been a big demand lately for precious metals – silver and gold – which are the traditional hedges against inflation. Many people are betting big on these, thinking that the falling US Dollar will go unchecked.

I am certainly not qualified to tell the Chairman of the Federal Reserve what he should do. Ben Bernake knows far more about this sort of thing than I. What I can do, however, is speculate on what the coming weeks will bring. I forsee a lot of traders trying to take profits in the current market, and while I don't see a massive sell off, I do think that the market will make a correction of around 100 or so points before leveling off again this upcoming week. Inflation is just a fact of life these days, and while most agree that the price of fuel cannot increase at the pace it has been, it will likely plateau and stay high for quite a while. Personally, I have a few mutual funds that are heavy in gold futures, and these have been my safe bets since I have been investing, but not where I am putting my money. The steady increases are nice, but I am still more of an aggressive investor. I am going to keep adding to my tech and alternate energy funds (after all, Apple seems unaffected by sky high fuel prices, while windmills and electric cars – GM IPO anyone? - keep looking better and better) but might try to take advantage of the volatility in commodities if I can swing some extra capital. Don't forget, if you're in the market, you're in it for the long haul... not to make a quick buck.