Market Analysis

Bernanke and the Bandit

A Burt Reynolds film classic and the Fed? They've got more in common than you might think.

It was another exciting Friday night at the Anderson household. My wife, jetlagged from a cross-country business trip, was asleep by nine. Left with full control of the TV remote and a good hour until bedtime, I embarked on a journey through the vast expanse of cable channels. There, among Seinfeld reruns and infomercials pitching revolutionary new exercise contraptions, I stumbled upon one of my favorite old movies: Smokey and the Bandit.

For those unfamiliar with this cinematic masterpiece, Burt Reynolds plays "the Bandit," a modern day bootlegger hired to transport a truckload of beer across the country. As the Bandit and his partners in crime haul that hooch, they communicate via CB radio in a dialect rivaling the elegance of the romance languages.

Oddly, the film reminded me of a different kind of CB communication—central banker lingo. After all, sitting there listening to the Bandit rattle off idioms recognizable only to his trucker buddies wasn't so much different from listening to any number of central bankers discussing monetary policy, was it? Jargon like "quantitative easing," "term auction facility," and "beige book" are the products of the wordsmiths at global central banks just like Smokey and the Bandits' CB lingo.

It was getting late, and I began to doze. Passed out on the sofa, I had a really weird dream…

"Breaker, breaker, this here's Big Daddy Bernanke comin' at ya from the Fed. Subprime's got the credit markets lookin' like a parking lot. Spreads are widenin', ABCP and CDOs are backin' up. The FOMC is bringin' the hammer down on the target rate to see if we can't get ‘er movin' again. You copy that at the BOE Crazy-Man King? Over."

"That's a big 10-4 Bernanke. The BOE has your back door, and rates are comin' down here too. We got some SIVs flip floppin' on banks' books. And Northern Rock flew the coop, so we're bringin' out the meat wagon. Looks like it's gonna be a bailout. Over."

"Roger that King. T-Bone Trichet at the ECB here. SoGen cracked ‘em up with a rogue trader at the wheel. But the CPI is blowin' our doors off, so interest rates are stayin' put. How's your LIBOR holdin' up Bernanke? Over."

"LIBOR's back on track. We rolled up the money bus with a new rig we call the Term Auction Facility since bankers are steerin' clear of the discount window like it's a bear trap. Lots ‘o dough out there. Anybody heard from the Monetary Policy Madman at the BOJ? Over. "

"Fukui's readin' you loud and clear. Looks like we got a central banker convoy. Deflation's finally licked, so quantitative easing and ZIRP are down n' gone. But rates are low and money's easy. Carry traders are spooked, but GDP broke the needle in Q4. Exports and CAPEX were wall-to-wall. Anybody seein' economic growth movin' in reverse? Over."

"That's a big negative Fukui. We ain't seen a negative quarter yet. Looks like the global economy's motorin' on despite a rough patch in global debt and equity markets. Over."

Bank of Japan's Governor Toshihiko Fukui in a mesh trucker hat is definitely a strange vision, but I think it makes sense in a way. Truckers and central bankers alike develop vernacular that best enables them to convey their intended messages. For truckers, the message might be the whereabouts of a "Kojak with a Kodak" (a police officer with a radar gun), whereas bankers might be relaying the potential ramifications of a housing slowdown on the domestic economy. But the ultimate goal is to keep the economy and/or trucks rollin'. So keep the shiny side up, the greasy side down, and your portfolio globally diversified. Over and out.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.