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Wednesday, September 21, 2011

Market Thought... the Fed and Colbert

I had a smirk when I heard CNBC say, "significant downside risk" as the Fed minutes came off the wire.  I smirked because the release was a very polite way to tell specific groups of people, "f- you" :)

The word "significant" was the Fed telling the ALL squabbling politicians to get their act together.  By not expanding the balance sheet they told the GOP, fuck-off.  By removing the yield cure, they told the banks to go fuck themselves too.

The only people the Fed didn't piss off was the American home owner.

I think I am the only one that actually liked the Fed's action today.  Even though I wanted to see no action by them, I really did like it.  The Fed knows the problems with the economy is no longer a monetary issue. Its not a bank lending issue, its not a need to expand their balance sheet issue, its a 'lack of plan, and too much bullshit for our elected leadership' issue. (As Jamie Dimon said last night.)

Since the banks are not lending to their capacity due to weak demand, the Fed took away the long-term yield to help the American home owner to save more money-per-month.  (This was done without expanding their balance sheet, and theoretically not adding increased pressure to the economy given the established 'weak' lending demand. But the loans made today will not be as profitable for the banks as they were yesterday.)

The market reacted fine to the minutes. Initially, the market started to break, but then started to move higher.  But around 3:07, well after the minutes were released, it just cratered.

IMO, the move was more technical. Unless Greece is defaulting tomorrow, and this could lead to our capitulation. Although there was some strong weakness in the transports today, from a perception that there is weak coal demand.  Even Cramer spoke up against that one.

I do not know why we broke down so hard toward the end of the day. From a technical perspective, the market was setting up to re-test the support it is currently on. (I thought it was take a few days, not less than an an hour.)

After the Fed minutes, the dollar rallied hard because the Fed's actions were not inflationary.

Maybe the dollar rally played a role, as the quants used this as a trigger to start selling, and exaggerated the decline. (Not a far-fetched idea considering the Euro-SP500 correlation lately. And the FXE broke-down after the fed minutes as well.)

Now, on a funny note: Here is Colbert's take on closing tax loop-holes and taxing the mega wealthy :)

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