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Why Operation Twist Is Like A Martini

|About: iShares 20+ Year Treasury Bond ETF (TLT), Includes: IEF, TLT

"Rate cuts are like martinis. The first one really feels good. The next few are sort of ho-hum. By the time one comes to the tenth, everyone is numb"

Art Cashin

This week, the U.S. Federal reserve announced Operation Twist would be extended by $267bn. The initial rounds of Quantitative easing were met with cries of horror and panic over the potential for hyperinflation.

But not this time. It appears the extension of Operation Twist is like that 10th martini, because there was very little or any clamor around the web about the imminent "Zibabwefication" of the U.S dollar. Even zerohedge could not muster up much more than a grumble.

And how about those bond vigilantes? Where are the warnings of yields on U.S. Treasuries skyrocketing to 8-9%?

So this makes me think of the great Art Cashin's comparison of rate cuts and martinis. Mr. Cashin made this excellent comparison after the fed had cut rates again and again in 2001 in an attempt to stimulate the economy.

Now, Operation Twist is not exactly a cut in the fed funds rate, but I like to think Art Cashin would approve of comparing this extension of operation twist to the 10th martini of the night.

Expect a replication of the massive rallies which came to the bond market after QE I and QEII stopped to hit long bonds (TLT, IEF). Do not fight the fed.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.