Pre-Fed, Market Is a Casino

Ah, Fed day. The day when the stock market most closely resembles the Bellagio. Today will prove to be no different though the house appears to have stacked the decks in favor of Wall Street and against Main Street (i.e., the plan is to crush the dollars in your pocket while reflating bank assets).

Despite the chatter coming on the back of the RBA rate increase, the Federal Reserve is unlikely to alter their stance on monetary policy. Ben Bernanke is still fully engaged in defeating the most dangerous and devastating deleveraging cycle of the last 80 years. Unlike many nations abroad, the U.S. economic recovery is still on very shaky ground. It’s now quite clear that the great mean reversion rally has been primarily liquidity driven and that the real economy is still weak. Although the pressures are mounting for the Fed to begin implementing an exit plan, I believe their accommadative stance is consistent with Bernanke’s ongoing battle with deflation. He has vowed not to let the second Great Depression occur and he will do everything in his power to ensure that is the case - even if it means a greater risk of inflation and destroying the dollar. Ben firmly believes he can print us right back to prosperity.

With that said, I think today’s Fed decision is unlikely to be surprising and that will likely to good news for the reflation trade. Bubbly Ben isn’t removing the champagne bowl(s) just yet. In fact, he would likely prefer to spike it a little further (Wild Turkey or 151 appears to be his drink of choice – guaranteed to make you feel great in the near-term, but also guaranteed to kill you in the long-term). The beat goes on. The dollar destruction continues, stocks will likely cheer the Fed’s recklessness, bonds will get crushed and gold will cheer the move. At least that’s my guess for today’s action at the gambling tables….

Comments

[John Galt:]

Good article and I like the thought of the market as the Bellagio but I do have one point to add.

< He has vowed not to let the second Great Depression occur >

From what I recall, Ben said that he wouldn't let the second Great Depression occur "under his watch".... That's a big difference than not letting it occur.

Throw money out of a Helicopter like a drunken sailor, and let somebody else worry about the after effects. Load up on booze, and worry about the hang over later.

Nov 04 09:40 AM

[Albertarocks:]

The FED has worked very hard to ensure this day would come, the day that they have finally painted themselves into a corner. The criminal part of it all is that over the decades, the painter looked all around himself in the room he was painting, could see that the only exit door was across the room and had he just taken the right path, he could have completed his work and exited gracefully. Go have himself a nice cold beer and enjoy the congratulations for a job well done.

But no! With full knowledge that he'd make more money faster by painting faster, even if he knew damned well he'd eventually be in that corner, the stupid greedy bastard painter did it anyway. And now the only escape appears to be the window. Good luck with that Ben and Tim. Enjoy your money while you can.... before you hit the pavement 325 floors below.

Nov 04 10:25 AM

[Ricard:]

"Although the pressures are mounting for the Fed to begin implementing an exit plan, I believe their accommadative stance is consistent with Bernanke’s ongoing battle with deflation."

Not sure where this 'pressure' is coming from. According to this Bloomberg piece, Bernanke may be subject to the opposite - to extend or increase unconventional QE efforts:

www.bloomberg.com/apps...

Nov 04 10:25 AM

[notsosmart:]

this braggard,me, never went to college but has been calling wallst a ponzi/casino for years.so some authors & anal-cysts finally begin to figure it out. now they better figure out that @ the rate this scheme is going there will be no middle class left for their "educated" advise.just rich & poor(maybe less rich as they move their money & families off shore.it will be slow as there is still plenty of beer & money for the "coliseum " seats.the greed "cancer " of this system will kill it.sad.

Nov 04 12:08 PM

[chris coonan:]

start buying wheelbarrows....to haul the money around....

Nov 04 11:30 PM