We’ve been seeing 85 Billion a month from the Fed for quite a while now. The last time there was an inkling that the fed might “taper”, we had a correction.
Now it seems people are covering the Fed announcement this week like the Super bowl
In my opinion a 50/50 chance at a cut is a stupid bet for both bulls and bears. Fact: We are at record highs in the indexes, with the Dow rallying 1500 pts since October 9th. That’s 1500 pts in 40 trading days.. So much for those of you who got short because you feared the fed then.
Look at the entire year? We started 2013 at 13000, and climbed the wall of worry to the tune of a 30% rally.. We started the year with gold at 1700. Low and behold we are fooling with 1200 an ounce gold now– coincidentally a 30% haircut.
The best laid plans of mice and men backfired if you got too bearish and didn’t adjust.
So much for out guessing the fed.
Common sense suggests fed tapering will give us a spike in the US dollar. That should put pressure on commodities. Do commodities really need any more bearish news? Gigantic crops. Farmers holding on to unsold grain and complaining because the Feds are talking about eliminating or drastically lowering the mandate for ethanol… The farmer in effect is losing a natural put they have enjoyed for the past decade if those cuts go through.
In my opinion, the herd is rarely correct and most of the time when every one focuses on one announcement or one report, that is generally a non event 3 days after the announcement.
Resist the temptation to over think or over bet on the Fed announcement.
Its a better bet to assume that , like a gigantic air-craft carrier, when we start to turn, we won’t turn on a dime. Watching a carrier task force turn at sea is a dance of logistics.. Having the Fed change policy after 6 years of priming the pump and saving liquidity is going to be a long drawn out process.
The only thing to be thankful for is the Fed Chairman is supposed to be A-political. As we gear up for 2014 Mid-term elections, with a budget deal seemingly on the books which will put an end to the political brinkmanship we’ve suffered through for the past 6 years.
In my opinion, this is a report you needn’t try to step in front of. Tapering is on the horizon. Is that really news? They’ve been talking off and on about it for 6 months… When it comes it will be baby steps. With 7.25% unemployment, combined with 10 million on disability, capped off with all the millions who are not considered un-employed b/d they have “left the work force”. This US economy can’t seriously stomach radical fed action. Regardless of your political bent, logically how aggressive can the fed actually get with interest rates at or near zero already?
CER