Friends
The bears brought a knife to the fight. Dr. Bernanke brought a bazooka. Sure, traders expected the Fed Chairman to announce some type of QE today, but what they got was much more than they bargained for. The FOMC statement that came out at 11:30 our time, indicated that the Fed would embark on more asset purchases which would include $40 billion of new Mortgage Backed Securities to be purchased each month with no end in sight. Indeed, the purchases are open ended, and Dr. Bernanke indicated that they would continue the policy even after the economy and employment show improvement. Wow! Oh, and by the way, interest will remain a 0% for the rest of time (actually until 2015, but who’s counting?). If you think you are going to continue to be a saver, that interest rates will rise eventually, Dr. Bernanke just burst your bubble today(actually, he has not concerned himself with you for quite some time). Enjoy those zero interest rates at the bank for years to come. If you want to make any money you need to come over to the “dark side”. If you’re retired and need a fixed income from your investments, good luck. You’d be better off buying some oil, or gold, or dare I say it- some stocks. Yes, the stock market exploded to the upside, as traders realized that stocks might be the only game in town.
For the day, the Dow Jones Industrial Average was up 206 points to close at 13,540. The S&P 500 was up 23 points to finish the day at 1460. Gold was up $34 to trade at $1768 per ounce, while oil was up $1.09 to trade at $98.10 per barrel WTI.
Look folks, whether we agree with the policies of the Fed or not, the simple fact is that we have to deal with the realities of what the facts are. As always, you may think the Fed Chairman has lost his mind, but we have always said don’t fight the Fed. We have been concerned that the Fed’s policies have helped asset prices such as stocks and commodities, but have done little for Main Street, other than raising gasoline and food prices (a tax if you will). We have been concerned that continually adding punch to the punch bowl would result in diminishing returns, and we will see how this round of QE plays out, but we must manage the market we have, not the one we want. We’ll keep you informed along the way. But for this day, the nod goes to Dr. Bernanke. Politically motivated or not, he made his play. Now, we’ll see if it works.
Have a nice evening everyone.
