No One Man Should Have All That POWER
- Posted by DynamicHedge
- on September 14th, 2012
If you’ve publicly proclaimed that the Fed is “out of ammo” in the last 12 months, kindly stand up and leave the room. Not only did the Fed go all in, but they did something almost everyone had completely written off. They surprised the market. You’ve got to admire Bernanke for being so bold. Especially when market observers are screaming “Why isn’t he doing anything?” And upon action “He’s gone waaaay too far!”
Dr. Bernanke is looking to do one thing and one thing only with this round of QE — increase the wealth effect. The richer you feel, the richer you act. He made it very clear that he will not stop until he’s reached his goals. You can disagree with him in principal all you want but he’s the one with the $40 billion bazooka.
I absolutely hate prognosticating about the Fed. Not my strong suit. But here’s the situation: the economy is improving (weakly), the market is acting healthy, and you have unlimited bond purchases (easing) in Europe and the United States. Listen to the market feedback and watch for signs that this is a sell the news event, but don’t over think things. Just because they’ve sold off on past announcement doesn’t mean they will in the future. The market is learning well what to do with these QE events and what they mean for asset prices. I wrote back in August that if the market could navigate early September then all-time highs may be in the cards. My default thinking is still on new all-time highs.
Watch the video below in its entirety before you come to sudden conclusions. Dr. Bernanke answers all of your questions and then some. He even hints at the next crisis. Here are some highlights:
17:20 mark “We are going to pump money into the system until you feel as rich as Rick Ross ghost-riding a Maybach.”
17:20 mark (later, same passage) “In the event that one of our desired unintended consequences bubble doesn’t blow itself, we will fall back on a repeat of the largest housing bubbles of all time.”
27:00 mark “Thanks for the question, Fox News. Mitt thought he could get at me, so I drove a non-partisan stake right through the heart of his presidential campaign.”
Disclaimer: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please click here for a full disclaimer.
DynamicHedge is an equities, futures and derivatives trader based on the West Coast. He runs a long/short opportunistic relative-value strategy within a proprietary trading group. More
- Wait for the market to flex
- How SPY typically trades after a gap up/down on NFP report
- Ebay Monster Gaps
- Ghosts of Death Cross Past
- Yahoo Strategy Ahead of Alibaba IPO
- 3 Important Things To Watch For At 52-week Highs
- Big Down Days: A Lesson from Recent History
- Market Cap Arbitrage: SPY vs IWM
- How to Deal with High Frequency Nowcast Economic Data
- An Almost Impossible VXX Rally