Today the FED let it be known that they will MOST PROBABLY be on hold until mid-2013. The best outcome of this is that it removes the FED from the election campaign of 2012 and puts the burden on the 535 posers who pretend to represent anybody but themselves (yes, there are exceptions I know). The FED has done their “work.” Now it is time to get the fiscal house in order. The markets’ daily gyrations is representative of how uncertain the world’s capital feels: ONE DAY YOU’RE UP AND THE NEXT DAY YOU’RE DOWN. From Bernanke’s perspective, we ain’t got nothing yet.
The most fascinating thing about the FOMC STATEMENT was its tone. My initial reading led me to believe that the FED‘s view of the economy has turned so morose that when the cleaning staff came in they would have found that the FEDERAL RESERVE BOARD had drunk HEMLOCK after writing the statement. There was not one positive element in the statement and to make matters worse (or better), the vote was 7-3 with Plosser, Fisher and Kocherlakota voting against the Bernanke core, as the dissenters wanted to maintain the extended period language. The question for the markets is: WHY DID THE S&Ps RALLY SO DRAMATICALLY AFTER THE FOMC STATEMENT? The first response to the MOROSE LANGUAGE was a large selloff and the S&Ps gave up a sizeable rally and went lower, only to reverse in the last hour and make new highs.
Some will say that the rally was due to the PPT (PLUNGE PROTECTION TEAM),as the theory about the FED buying equities just want go away. More important for me will be to see if the markets are going to resolve that a zero interest rate policy for the next two years is enough to push money back to equities. It will TAKE TIME to see if this is credible but it is something that we must watch. As I wrote last night, all Bernanke has now is the portfolio balance channel,the S&P/bond ratio becomes a very important indicator. Pour yourself a SCOTCH and read the FOMC statement … and put away the HEMLOCK.
Quick hitter: THE SWISS FRANC hit all-time highs today as it seems that anybody with money that is seeking safety is heading for Zürich. Is it possible that all the world’s wealthy elite are so terrified that they are rushing to Switzerland (the safe deposit box for the DAVOS CROWD)? It is amazing how strong the SWISS FRANC is, especially relative to such high quality currencies like the Canada.
Will the Swiss Authorities respond as the FRANC has hit levels that will HOLLOW OUT THE ECONOMY? I have traded the CHF for 34 years and have never seen the type of price action we are now experiencing. GOLD at $1780 I understand. The SWISS FRANC at $1.40[.7150 centimes] leaves me wondering just what is driving so much money into the hands of gnomes. Watch for some type of action or statement from the SNB but trade with caution as a haven can become hell.