Bernanke speaks, market overreacts, what's new?

Fed Chairman Ben Bernanke just about said everything that he could say to sooth market fears yesterday, but as usual the market reacted in its knee-jerk way with a little sell off, the excuse being that he probably wasn't as certain with his response as they would like him to be and there is still this remarkable fear that tapering will come sooner than the market wants.

However, given the great unknown experiment that is going on with QE and the monthly bond buying, how could he be certain than to say that it is data dependent?

The Fed has said it would keep rates close to zero so long as the jobless rate, now at 7.6%, was above its 6.5% threshold.

And the Fed chairman stressed the bank won't start to hike rates even once its economic targets are met. He said the bank has to be convinced the economic recovery is on a solid upward path before it starts to pull back.

“Our policy is in no way predetermined,” Bernanke said. “Our policies are tied to what’s going on in the economy.”

Indeed, 14 of the 15 Fed members don’t expect the first rate hike until 2015, according to the bank statement.

“The Fed is in no hurry to remove monetary accommodation, but as the downside risk to the U.S. economy and labor market diminish, the rationale for maintaining emergency quantitative-easing measures becomes harder to justify,” said Scott Anderson, chief economist of Bank of the West.

http://www.marketwatch.com/story/fed-much-more-upbeat-about-outlook-2013-06-19

So, basically this gives the market what they wanted. If the economy does improve then QE cannot go on as the risks for real inflation become deeper. Surely the market wants an improved economy? Or does it just want an endless supply of newly printed money every month because that is easier? Fair enough the market had gone up in the 2 previous sessions, so the sell off was probably an excuse for quick profit taking. Sometimes any excuse will do, but sooner or later the market will have to learn to live without the Central Banks intervening in this way and if the economy is supposedly improving then what is the problem for the market?

In the meantime, with the markets going down it doesn't alter the fact that many companies are still producing good results.

Key words in company reports, still effective indicators?

In his book The Naked Trader, how anyone can make money trading shares, Robbie Burns highlights the secret Naked Trader traffic light system using a tool available on the financial site ADVFN.  In brief what this does is to look for key words in company news, statements, reports, announcements, etc with the intention of looking for positives and negatives.  This can then be used to find companies to both go long when positive and short when it is negative.  NT has apparently used it over the years to great success and using such words when searching for trading and investing opportunities is a useful weapon for all investors and traders to take note of and make use of. 

Ashtead Group, today's FTSE250 flyer

FTSE250 Ashtead Group is one of those companies that is worth following if only because its business is essentially a reflection of what is happening in the wider economy, both in the UK and elsewhere.

It describes itself thus;

Ashtead Group is a leading provider of rental equipment with operations in the US and the UK. We provide equipment that lifts, powers, generates, moves, digs, supports, scrubs, pumps, directs, ventilates, whatever the job needs. We rent equipment so that our customers can focus on what they do best rather than maintaining and servicing equipment they may use only once a year.

http://www.ashtead-group.com/

I suppose that it is possible that it might actually do better during bad times rather than when the economy is booming as companies decide to put off purchasing equipment and instead decide to hire it.  On the other hand, being one of the biggest plant hire firms in the UK and the US, it is in a prime position to be a go to company at any time, in both good and bad economic times.