Pre-Bernanke action

Pre-Bernanke action

We’re a bit skeptical about what Benny and the Feds will say in this 2pm afternoon address. We are short the rally that’s occurred this morning. While we can’t overlook the possibility that QE3 will be announced we think it’s unlikely based on a few things….

1) It’s not the Feds mandate to prop up the stock market despite what some say and despite what the Feds actions sometimes cause.
2) Unemployment remains unchanged- the last NFP number was bad but not abysmal
3) Inflation per the gov’t calc is basically on pace with the target
4) Treasury yields are down-rates remain low.

It’s not of our opinion that the Fed has the license to do much more based on the fact that the stock market has had a mini crash over the past two weeks. We think there will be language hinting at possible further QE if the jobs number deteriorates or interest rates rise but beyond that, we’re skeptical.


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