Will the new FED chair satisfy or disappoint? – 02/16/2014

If there is one thing markets hate more than anything is uncertainty and change. With Ben Bernanke being replaced as Fed Chair by Janet Yellen, the markets are going to have to digest a little bit of both. Although, it’s not exactly like Janet Yellen is unknown. She has been an active policymaker for a dozen years and for decades taught economics at the University of California, Berkeley, but you never know how sitting in that all important position will affect their policy decisions.

Yellen’s First Test

Yellen faced her first major test this past week when she testified for the first time in front of Congress. Markets were waiting to see how she would handle herself as she faced a barrage of pointed questions from critical U.S. Lawmakers about the Fed’s unprecedented efforts to stimulate the economy and its oversight of banks.

Most likely due to her years of experience, she was able to remain calm under pressure and handle even the toughest of questions in a measured tone that the market liked, as the S&P 500 rallied after the testimony. I believe the reason the market reacted favorably was because it seems like there will be very little disruption from Bernanke’s policy. She showed that she will remain flexible when it comes to tapering QE3 and the decision on keeping the short rate near zero, where it currently sits. Again, the markets hate uncertainty and based on her testimony, it seems like she will keep that uncertainty to a minimum.

Smooth Transition

When Rep. Carolyn Maloney (D-New York) pressed her with her with questions about what it would take to cause her to consider pausing the tapering process, Yellen answered the question directly and essentially said the Fed would adjust as needed. This exchange showed she is not just going to stick to a set tapering schedule, but decisions will be data dependent. Nothing is set in stone. However, she did say tapering would remain intact for the time being and wasn’t too concerned about recent weak data on employment. I too am not yet concerned about the recent weak growth in jobs. It’s only two months of data and the overall trend in the long-term is still positive.

Yellen was immediately put on the spot when House Financial Services Committee Chairman Jeb Hensarling challenged the Fed’s wide departure from a decades-old monetary policy rule of thumb that Yellen once called the mark of a “sensible” central bank. He asked “So that begs the question today, using your words, are you a sensible central banker, and if not, when will you become one?” Her reply: “Congressman, I believe that I am a sensible central banker,” showing that she won’t be rattled by Congress, causing her to make decisions based on politics, rather than on economic data.

In an exchange I found particularly interesting, she was asked repeatedly if the Fed was “enabling” government deficits with its massive bond-buying program, QE3. Again she was firm in the face of the grilling, answering the question in what I felt was a sensible way. “I don’t think it would be helpful, either in terms of achieving the objectives that Congress has assigned to us or in terms of Congress’ deficit reduction efforts, for us to purposely raise interest rates in order to weaken the economy,” she said. “The likely impact of that weaker economy would be larger deficits.”

The Ongoing Emerging Markets Problem

While Yellen made it clear she understands that U.S. fortunes are now intertwined with the global economy, she said the U.S. economy is the Fed’s primary mandate. She said emerging economies don’t pose a serious risk to the U.S. economy right now, then stated the Fed is “monitoring” the situation closely.

The confluence of events in Turkey, Argentina and Ukraine created a panic and the emerging markets experienced significant correction. However, this is different from the 1990s. Most Emerging markets have higher international reserves and lower debt and thus higher policy power. Fed tapering has created a sense of uncertainty but it was somewhat expected and investors have already rebalanced. To some extent, investors are also asking for structural reforms in many of these emerging countries.

Emerging markets have been getting hammered with currency issues and high debt levels. Some of this could be caused by the fact that the tapering process is still intact, which will eventually lead to higher interest rates and money to move out of emerging markets and into safer, higher yielding investments. Yellen confirmed that, for the time being, tapering will remain intact which will put added pressure on emerging markets.

The issues surrounding emerging markets, while I believe are likely overblown, did add fuel to a pullback in stocks that ended on February 3rd. The S&P 500 dropped almost 7% in a short amount of time, but has since rebounded and is almost back to where it started the year. While the situation remains fluid, at this time I agree with Yellen and don’t believe emerging markets will derail the global economic recovery that is underway in most of the developed world.

Putting it All Together

There is an argument that has been called the “Curse of the New Fed Chair,” in which some argue the markets gets more volatile when a new Fed Chair takes over the position as investors grapple with the uncertainty of the new regime. This may have also played a part in the recent pull back we have since bounced back from. But overall, I expect Yellen to be pretty much like Bernanke and expect her to continue the tapering process in a controlled, measured pace. So, as far as uncertainty goes, I believe a lot of that was taken away after her first appearance as Fed Chair in front of Congress. This year may be more volatile than last and we probably won’t see the same huge returns from stocks that we saw in 2013, but this bull market has plenty of fuel left.

About Mitch Zacks

Mitch is a Senior Portfolio Manager at Zacks Investment Management. He wrote a weekly column for the Chicago Sun-Times and has published two books on quantitative investment strategies. He has a B.A. in Economics from Yale University and an M.B.A. in Analytic Finance from the University of Chicago.

Mitch also is a Portfolio Manager for the Zacks Small Cap Core Fund ( ZSCCX ).

Annunci

Get Ready For a Volatile 2014 – 02/02/2014

Get Ready for a Volatile 2014

by Mitch Zacks, Senior Portfolio Manager

If January is any indication, we should all prepare ourselves for large amount a stock volatility in 2014 and it may be more difficult than usual, given how little volatility we experienced in 2013. Volatility is what causes sleepless nights and that sinking feeling in your stomach. It is a terrible thing to go through, but completely normal and part of being an investor. Nobody ever said investing was a free ride and in 2014, I expect that ride to be a bumpy one due to the reasons listed below.

After the US economy grew at a blistering pace of 4.1% annualized in the third quarter of 2013, many were expecting a drop-off in the fourth quarter. However, the initial reading came in Thursday showing the economy grew at a very healthy clip of 3.2%. After all the talk of sluggish holiday sales and deep discounts not being enough to draw shoppers into stores, consumer spending rose at the fastest pace in three years. Household purchases rose at 3.3 percent rate, the best performance since 2010.

The increase was not constrained to one area of the economy. The rise in demand was broad-based as business investment accelerated, which was already showing signs of picking up as I mentioned in a previous column. Exports also grew, overcoming the damage done by the 16-day partial shutdown of federal agencies and budget cuts. Add this to the sequestration and tax hike we had at the beginning of the year and the US economy has shown itself to be remarkably resilient and healthy.

US stocks rebounded Thursday on the GDP news, completely erasing the losses of the week. However, at the time of this writing the S&P 500 is down 34 basis points to stand at 1,787. Despite some steep sell-offs recently, the S&P 500 is only down 3.3% on the year. Adding to the advance were several large companies beating earnings estimates. All 10 main sectors in the S&P 500 rose on the news of the economic growth.

Tapering Continues

On Wednesday, The Federal Reserve decided to cut its monthly asset-purchase program by another $10 billion to $65 billion ($35 billion of longer-term treasury securities and $30 billion of mortgage-backed securities).

In the statement issued after the two-day FOMC meeting, which was the last given by Ben Bernanke as Fed Chair, they said 的nformation received since the Federal Open Market Committee met in December indicates that growth in economic activity picked up in recent quarters.”

Though most believed the Fed would continue its tapering plans of cutting $10 billion each meeting, a poor December jobs number and ongoing turmoil in the emerging markets led many to believe there may be a pause in the taper schedule. Stocks sold off approximately 1% after the announcement.

After the market close on Wednesday, 44 companies in the S&P 500 have reported profit above projections of analysts. Four companies trailed projections.

Could This Be the Second Shoe to Drop?

One of my concerns is there continues to be trouble in emerging markets. Emerging market currencies have been under pressure for some time, partly as a result of the effectiveness of the monetary stimulus of the US Federal Reserve. The monetary policy of the Fed has strengthened the U.S. economy and therefore reduced the relative attractiveness of emerging markets.

However, a survey out of China signaled the first time manufacturing there shrunk in six months. The HSBC survey backs up a preliminary version earlier this month that rattled markets by raising fears that the world痴 second largest economy is slowing. Whenever China hiccups the market tends to over react and in this case, HSBC痴 Purchasing Manager Index ( PMI ) for January came it at 49.6, down from a final reading of 50.5 the previous month. A number below 50 indicates contraction. While the reading was not good, it does not portend a global economic slowdown.

While the potential for a slowdown in emerging markets causing the earnings of U.S. multinationals to decline is real, the fear is likely overblown. At the end of the day, the market was looking for a reason to sell-off after its run-up. The emerging market problems are more of an excuse than anything else.

The news overseas in Europe was better with German unemployment declining more than originally forecast as continued growing confidence in Europe痴 largest economy kept growing. Like I have said in the past, while the peripheral countries in EU are slowly exiting their economic crises, Germany is the country that will be doing the heavy lifting in Europe.

In addition to Germany, England is showing signs of increasing health. Last year it was believed that England was in for a prolonged period of stagnant growth. The Bank of England finished Quantitative Easing and GDP had fallen six of the previous 16 quarters. 2013 was supposed be a lost year. Yet the preliminary estimate of Q4 UK GDP is showing the economy grew at 0.7% q/q in Q4, which would bring the full-year growth to 1.9% – the strongest since 2007 and the first time the UK has grown four straight quarters since the third quarter of 2010. There seems little doubt the UK is headed in the right direction.

Putting it All Together

As you can see the developed economies across the globe are growing at a healthy clip or at least starting to. However, continued problems in emerging markets will most likely continue to cause jitters in the markets. We are essentially seeing a role reversal where emerging markets were growing at a brisk pace, but are now having currency and credit problems of their own. As I have said before, this could cause the correction that is long overdue, but the global economic expansion continues to pick up steam. While I expect a much more volatile year than last year, I believe developed markets will lead the way to another strong year in equities.

About Mitch Zacks

Mitch is a Senior Portfolio Manager at Zacks Investment Management. He wrote a weekly column for the Chicago Sun-Times and has published two books on quantitative investment strategies. He has a B.A. in Economics from Yale University and an M.B.A. in Analytic Finance from the University of Chicago.

Mitch also is a Portfolio Manager for the Zacks Small Cap Core Fund ( ZSCCX ).

Quartz Daily Brief—Russia slows, Bernanke exits, Japan inflates, the 1% freak ou

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Good morning, Quartz readers!

What to watch for today

The Fed’s first female chair. It’s Ben Bernanke’s last day in the hot seat, as Janet Yellen steps up to the US central bank’s top position on Saturday. Her mission: wind down the Fed’s stimulus without damaging the global economy.

Russia’s slowing growth. Analysts predict that Russia’s economy expanded by 1.5% in 2013, the weakest growth in four years. The country relies heavily on oil and gas exports, which suffered from low demand due to Europe’s economic woes.

The state of Europe’s job market. The euro zone’s unemployment rate has hardly budged for the last year, hovering around 12.1%, and markets aren’t holding their breath for a shocker today. But even a tiny drop would point toward a post-crisis recovery.

Mexico’s interest-rate decision. Most expect no change from today’s Bank of Mexico meeting, but policymakers will  somehow have to answer to Mexico’s rising inflation, which hit 4.6% this month.

Thailand braces for elections. Prime minister Yingluck Shinawatra’s government is pressing forward despite the risk of violent clashes with protesters who have vowed to disrupt Sunday’s vote. Here’s how it could all play out.

While you were sleeping

Japanese inflation sped up. Prices rose 1.3% in December, a shot in the arm for the Bank of Japan’s goal to reach 2% inflation. Some analysts remain skeptical it can go much beyond that.

Microsoft moved closer to a new chief. Satya Nadella, the company’s head of enterprise and cloud computing, is set to replace outgoing CEO Steve Ballmer. If he takes over, expect Nadella to aim Microsoft squarely at Google and Amazon in the cloud services wars.

Amazon made a profit and still disappointed investors. Though revenue grew 20%, it was the slowest increase since 2009, and the fact that profit more than doubled didn’t mollify the markets; perhaps they’re used to Amazon’s penchant for sacrificing profit for growth.

Libya sued Goldman Sachs for outsmarting it. The country’s sovereign-wealth fund filed a lawsuit accusing Goldman of showering the fund’s staff with gifts and smooth-talking them into “worthless” trades that netted Goldman a hefty profit.

Good news for US growth. The economy expanded by 3.2% in the fourth quarter, buoyed by the country’s highest consumer spending in three years.

The year of the horse began. Asians marked the lunar new year with fireworks and dancing dragons. In China, hundreds of millions of people travel home for the celebrations (but pets hate them).

Quartz obsession interlude

Heather Timmons on life after banking in Hong Kong. “Rather than leaving Hong Kong in search of the next banking hot-spot, a growing number of finance pros have started businesses, from last-minute hotel booking websites to crowd-funding groups to organic farms. The career-hopping has helped push start-ups to 16% of new investments in Hong Kong last year, from 11% in 2010, Bloomberg reported today. In many cases, they’re going directly after their old employers’ business.” Read more here.

Matters of debate

The one percent are freaking out. Global bank bashing and Obama’s push against income inequality are driving America’s wealthiest to mass paranoia.

The Super Bowl doesn’t boost the US economy. Predictions of multi-million dollar cash injections are usually just hype.

China can’t let its housing bubble pop. If it does, the damage to household wealth and consumption would be devastating.

Stop listening to Tony Blair on the Middle East. He’s usually on the wrong side of history.

Surprising discoveries

Blockbuster lives south of the border. There’s still a thriving video-rental market in Mexico.

The gynecologist will see you now, sir. The American Board of Obstetrics and Gynecology relaxed its ban on male patients.

The Seinfeld cast is re-uniting. In the timeless words of George Constanza, “I’m back, baby, I’m back!

The Cronut became the C®onut. Many bakeries worldwide have imitated the croissant-donut hybrid, but now the name is sacrosanct.

Our best wishes for a productive day. Please send any news, comments, Seinfeld quotes and alternative pastry names to hi@qz.com. You can follow us on Twitter here for updates throughout the day.

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Quartz Daily Brief—Google disconnects Motorola, Bernanke’s last taper, Amazon results, condiment wars

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Good morning, Quartz readers!

What to watch for today

Amazon primed. The online retailer is expected to report fourth-quarter profits of $318.9 million, up more than two-fold from a year earlier, on strong holiday sales and membership programs like Amazon Prime. Take those numbers with a grain of salt, though—Amazon misses estimates about half the time.

Google seeks a new path. The search giant is set to unveil its earnings on the heels of reports from Apple, Facebook, and Yahoo, and a wave of major acquisition activity (buying robots, thermostats, and AI; selling Motorola) in its hardware business.

Can the US economy keep up its growth spurt? Fourth-quarter GDP is expected to show 3.2% growth year-on-year, thanks to strong consumer spending. Some analysts are punting for over 4%, though, following the previous quarter’s 4.1% annualized increase.

While you were sleeping

Google conceded that it’s not great at making smartphones. The search firm is selling handset maker Motorola Mobility to China’s Lenovo for a fraction of the price it paid in 2011. But profits were never the point of the acquisition—it was about putting pressure on Samsung.

Chinese manufacturing shrank. The purchasing managers’ index fell below 50, the threshold that divides contraction from expansion, for the first time in six months. Stocks across Asia slipped on the news.

Bernanke’s last taper. The US Federal Reserve reduced its bond-buying stimulus by another $10 billion a month, as expected. But the era of Ben Bernanke, who steps down as Fed chairman on Friday, is far from over.

Philippine GDP was stung by Haiyan. The devastating typhoon pushed the country’s fourth-quarter economic growth down to 6.5%, from 6.9% the previous quarter, but that was better than most analysts expected.

Pimco went to its management bench. The bond fund promoted four managing directors, who will join two others to fill the shoes of Mohamed El-Erian, its outgoing CEO.

Facebook had a great fourth quarter. Net earnings were up eightfold year-on-year, to $2.6 billion. And for the first time, mobile ads accounted for over half the company’s revenues, a good sign given that users are moving to mobile.

Quartz obsession interlude

Gwynn Guilford on the markets’ curious indifference to an impending Chinese financial disaster. “The financial media were buzzing yesterday after a BofA/Merrill Lynch report called the Jan. 27 bailout of a 3 billion yuan ($465 million) investment product in danger of going bust a ‘Bear Stearns moment.’ […] If you accept that analogy, the implication is that China’s ‘Lehman moment’ —the equivalent collapse of a much larger bank or investment product—is nigh.” Read more here.

Matters of debate

The American dream is dead. Social mobility hasn’t improved in the last 50 years, and income inequality has increased.

Higher education isn’t worth it. The cost of college is soaring, but its content is growing weaker.

Estonia has a lot to teach the world. Its tech-savvy government is a leader not only in digitizing citizens’ information, but also in protecting their privacy.

Europe might be better off leaving Ukraine to Russia. Even if a pro-European government takes over in Kiev, it might find the EU’s bailout terms too onerous to handle.

Surprising discoveries

Mayonnaise is America’s favorite condiment. Take that, ketchup.

Japanese scientists found a “game changer” in stem cell creation. All blood cells need is a quick dip in acid.

The president of Northwestern University predicted online education, with surprising accuracy, in 1934.

How to eat first-class airport lounge meals for a year. And pay nothing for it.

It takes 42 gallons of water to produce a slice of pizza. And more than seven times that for a chocolate bar.

Our best wishes for a productive day. Please send any news, comments, favorite condiments, and ideas for getting free meals  to hi@qz.com. You can follow us on Twitter here for updates throughout the day.

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Quartz Daily Brief—Bernanke’s farewell, Obama’s retirement plan, Facebook’s results, dictators’ flagpoles

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Good morning, Quartz readers!

What to watch for today

Ben Bernanke’s last taper. At the Fed chairman’s last policy meeting, the US central bank is expected to reduce bond-buying by another $10 billion per month, ignoring weak jobs December growth (which economists think was an anomaly) and emerging-market turmoil.

Facebook tries to hush the haters. The company is expected to post a whopping 65% jump in fourth quarter profits on revenue of $2.34 billion, thanks to a boost in advertising over the holidays, even as a string of reports suggest the social media site is becoming less popular.

Will South Africa act to save the rand? With the currency trading at five-year lows, the central bank is under pressure to follow India and Turkey in raising interest rates at its meeting. Investors often treat the rand as a proxy for emerging-market currencies,

While you were sleeping

Emerging markets rebounded on Turkey’s bold move. Asian stocks surged after Turkey more than doubled interest rates, stemming the three-day stampede out of the developing economies.

Obama’s state of the union speech. The US president introduced plans to boost the minimum wage and create behavioral economics-enabled retirement accounts, and touted America’s popularity among foreign investors, which has surpassed China for the first time in more than a decade.

Ford drove up its sales, posting full-year pretax profits of $8.56 billion—one of its highest figures in recent history—and sales growth of 12%, trumping Toyota. However, investors expressed concerns about Ford’s upcoming expensive year.

Google made Glass look (slightly) more normal. The company has unveiled regular frames, including sunglasses and prescription lenses, with the Google Glass face computer clipped on.

Wall Street not impressed with Yahoo. Though the company’s quarterly results beat forecasts, its shares fell in after-hours trading on a so-so first-quarter outlook. And it didn’t say anything about whether it’s making money from Tumblr, the blogging platform it bought last May.

Quartz obsession interlude

Gwynn Guilford on how fish oil fashion is sending rare sharks to their death. “Today’s bloodbath bulletin concerns whale sharks, which feed on plankton and can grow up to 40 feet (12 meters)—about the length of four station wagons. The sharks are so vulnerable to extinction that most countries forbid fishermen from catching them. That’s not stopping a factory in China’s Zhejiang province from slaughtering 600 whale sharks per year.” Read more here.

Matters of debate

America’s “industrial renaissance” is a farce. It’s a trickle of jobs at poverty-level wages that are heavily dependent on huge public subsidies, says former Obama auto advisor Steven Rattner.

The sun is setting on the iPod. Streaming services—as well as the ever-growing spread of iPhones—are killing Apple’s original music player.

Hamid Karzai is playing a dangerous game. The Afghan president’s digs at the West won’t protect him from a resurgent Taliban when the US pulls out.

War photography has been turned on its head. What used to be a tool to expose cruelty has become a way for perpetrators to document and brag about their violence.

Dungeons & Dragons as management training. Kids who learn to organize a band of elves, wizards and warriors have all the tools to manage a workplace team.

Surprising discoveries

Antarctica was perhaps once a forest. Ancient tree stumps have been discovered on the giant continent buried in ice a mile deep.

Chocolate is so hot right now. And so is hot sauce

Erecting flagpoles for dictators. Trident Support Corporation builds the world’s tallest—like the 541 ft (165 m) record-holder in Dunshabe, Tajikistan—for authoritarian rulers around the world.

Germany will win the most medals at the Winter Olympics. So says a prediction based on a little simple math.

Our best wishes for a productive day. Please send any news, comments, flagpole records, and Antarctic tree fossils to hi@qz.com. You can follow us on Twitter here for updates throughout the day.

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Quartz Daily Brief—US freeze, Fallujah’s fall, bitcoin’s bounce, ancient beer

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Good morning, Quartz readers!

What to watch for today

Janet Yellen is confirmed as Fed chair. The US Senate is expected to greenlight Yellen’s nomination as the central bank head. Assuming it does, she’ll take over from Ben Bernanke at the end of the month.

State of the services industry. Purchasing managers’ indices come out both for the US and for the UK, giving an update on their increasingly important service sectors.

Record low temperatures in the US. An Arctic cold front could bring the lowest temperatures in 20 years to much of the country, with half the nation at 0 °F (-18 °C) or lower. Thousands of flights were canceled—and Disney’s Frozen won the weekend box office.

CES kicks off. The Consumer Electronics Show, the industry’s mega-jamboree, formally begins tonight in Las Vegas with keynotes by the heads of Intel and Audi. (Connected cars are going to be one of this year’s big themes).

Over the weekend

China economy data continued to disappoint. The HSBC services purchasing managers’ index (PMI) for December dropped to 50.9 from 52.5, staying barely above the level that indicates expansion. A wide range of December economic measures have shown a sharp fall-off in activity as government support has receded.

Israelis and Palestinians agreed on gas, at least. The two sides made no breakthroughs in their latest peace talks, but the Palestinian power utility signed a 20-year, $1.2 billion deal with US-based Noble Energy and its Israeli partners for gas from Israel’s offshore Leviathan gas field.

A $930 million satellite deal foundered due. A United Arab Emirates purchase of French intelligence satellites fell apart after the buyers discovered US-made components that would have enabled remote access to secure data.

Jihadists took Fallujah. An al-Qaeda affiliate, ISIL, took control of the city where some of the bloodiest fighting of the Iraq war took place. Iraqi forces said they could kick out the militants in two to three days, but it’s still a severe blow to the government of Nouri al-Maliki.

Thais took to the streets again. Demonstrators are ramping up protests in a bid to shut down Bangkok on Jan. 13, topple prime minister Yingluck Shinawatra, and block next month’s election. The country’s crucial tourism sector is already hurting (paywall).

Bangladesh held a failed election. Fewer than half the parliamentary seats in the country’s 10th general election were contested because of an opposition boycott, and 18 people died in clashes between police and protesters

Bitcoin bounced above $1,000. The crypto-currency, which had at one point fallen almost 50% from its December record of $1,238 per bitcoin, shot back up on news that online games-maker Zynga would start accepting bitcoin for in-game purchases in some of its games.

Quartz obsession interlude

Matt Phillips translates Fed chairman Ben Bernanke’s parting shot on the US economy. “‘The FOMC’s decision to modestly reduce the pace of asset purchases at its December meeting did not indicate any diminution of its commitment to maintain a highly accommodative monetary policy for as long as needed.’ Translation: Even though the Fed is getting out of the bond-buying business, the Fed Funds rate is going to stay low for quite some time… In short, Bernanke still thinks the economy is pretty weak.” Read more here.

Matters of debate

The UK housing crisis embodies everything that’s wrong with neoliberalism. Thatcher’s sell-off of public housing is still haunting Great Britain.

Cancer will never be defeated. Unlike viruses, germs, and heart disease, tumors are the result of a basic evolutionary compromise.

The US looks worryingly similar to ancient Rome. The republic’s collapse was heralded by similar political paralysis.

Fiat’s troubles are far from over. CEO Sergio Marchionne swung an amazing deal with the Chrysler acquisition, but the company is still on extremely shaky ground.

Africa needs a Marshall Plan. A program of reform, infrastructure-building and industrial development is the only way to contain a vast jobs shortfall in the next few years.

Surprising discoveries

The pope can’t get his phone calls answered. Pope Francis called a small convent in Spain on New Year’s Eve, but nobody answered.

Ancient Egypt’s master beer-brewer. Archaeologists have unearthed his tomb.

The US has over 3,000 religiously-named places. Lots named after saints, of course, but also a Bridge of the Gods, a Stairway To Heaven, and six Santa Claus Lanes.

The world leaders with the longest names. The winner: Hery Martial Rajaonarimampianina Rakotoarimanana of Madagascar.

Our best wishes for a productive day. Please send any news, comments, ancient beer recipes and absurdly long names to hi@qz.com. You can follow us on Twitter here for updates throughout the day.

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Quartz Weekend Brief—Fed taper, battery feuds, sticker commerce, lunar sculpture

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Good morning, Quartz readers!

The Fed threaded the needle.

After months of fretting, the US Federal Reserve said it would begin easing up on the bond-buying that’s helped support the US economy since the financial crisis.

Curiously, markets greeted the so-called taper warmly. (It will begin in January.) Bond prices—long supported by Fed bond-buying—barely budged. The S&P 500 jumped, a counterintuitive reaction as the Fed’s activism is widely credited with driving the market’s gains in recent years.

Why? Well for one thing, a spate of very good economic data—industrial productionhousing startsretail salesGDP—suggests the US economy may finally have enough momentum to improve with less Fed help.

Also, the Fed tempered the taper—which on balance should decrease support for the economy—by hinting very strongly that it would increase another form of support, namely keeping the Fed funds rate parked near zero for even longer than investors had expected.

But that move didn’t merely counterbalance the taper. It also marked a shift in approach. Giving clear hints of where interest rates will likely go—called “forward guidance”—is a policy tool that some economists prefer over bond-buying, because it avoids certain risks such as stoking inflation (though it carries its own risks, notably that it works only as long as markets believe the bank will keep its promises). In particular, it’s a favorite of Janet Yellen, who has been tapped to take over from current chairman Ben Bernanke when his term expires in January.

Bernanke’s final move, then, was to both take the first step in ending the vast amount of help the Fed has given the economy in recent years, and to pave the way for his successor. Classy.—Matt Phillips

Five things on Quartz we especially liked

At last, a good bitcoin explainer. Ever feel like you’ve read a ton of pieces about bitcoin but none explaining how it actually works? So did we. Ritchie King, Sam Williams and David Yanofsky break it down and make it simple. Best of all, your computer will mine for bitcoin while you’re reading it.

How the internet of things is going to come about. Christopher Mims completes his series on connected devices. Part I last week said 2014 would finally be the year the internet of things takes off; part II explains how it will replace the web; and part III lays out the one invention that’s needed for that to happen.

A feud at the heart of the Great Battery Race. A startup called Envia promised General Motors a battery on which an electric car could drive 200 miles. Now the project is suspended and it’s facing lawsuits. In a long, in-depth investigation, Steve LeVine tells the full story behind what went wrong.

The company that wants you to use cuddly animals instead of English. The difficulty of texting in Japanese and Chinese drove the growth of “stickers”—cute pictures that serve to communicate emotion. Gwynn Guilford analyzes the strategy of Line, a Japanese firm that thinks it can make them huge in the West.

The best central-bank game apps. Yes, there are really smartphone games about central banking, ranging from Inflation Island to Ten-Euro-Note Tetris. Jason Karaian reviews them all and gives five gold bars to the European Central Bank’s €conomia, “a surprisingly realistic simulation of life as Mario Draghi.”

Five things elsewhere that made us smarter

Why Switzerland has medevac helicopters for cows. They make milk for Swiss chocolate, but Swiss farming in itself isn’t economic. However, the government supports it lavishly because it plays a unique and crucial role in the country’s environmental and social health, explains Veronique Greenwood in Aeon.

How to find fulfilling work. Maria Popova summarizes the book of this title by Roman Krznaric, a co-founder of the School of Life, that explains why the five main things people seek in their work—money, status, impact, passion, and use of talent—are so elusive, and how to think correctly about the value of each one.

Why have no top executives been prosecuted for the US financial crisis? In the New York Review, Judge Jed Rakoff, a leading judicial critic of how the crisis was handled, offers a useful analysis of the complex relationship between Wall Street and Washington that suggests why nobody senior has been brought to book.

Not everyone in Silicon Valley loves bitcoin. A sizeable portion of technologists think it is at best a “a flawed but nonetheless worthwhile experiment” and at worst “synonymous with everything wrong with Silicon Valley,” writes Alex Payne, a programmer who worked at Twitter and at online banking startup Simple.

The strange story of the only sculpture on the moon. Near the Apollo 15 landing site lies a three-and-a-half inch aluminium figurine known as the Fallen Astronaut. Corey Powell in Slate recounts the bizarre, decades-long disagreement that resulted between the artist who made it and the astronaut who put it there.

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