Sex, Lies and Ticker Tape
Source: Resource Investor, Jon Nadler (5/19/11)
"Market bets now focus on if Fed action on rates comes in 2011 or 2012."
Financial markets learned with certainty yesterday that the Fed can no longer be regarded as wrestling with the idea of whether to exit from stimulus, but rather when and, to some degree, how. In parsing the FOMC's minutes that were recorded during its April 26–27 gathering, Fed watchers ascertained that the U.S. central bank's policymaking members are basically nearing an agreement on the steps they will take to drain the bathtub of liquidity in which many a speculator has been enjoying a very fun-laden bubble bath for some time now.
While financial markets learned that ticker tapes are moved by scribbles found in the Fed's meeting minutes, the world at large this week learned that the rich/famous/powerful can reliably be counted on to eventually reveal—not by choice, mind you—that they are driven by the heady pheromones of sex/money/drugs and that sooner or later they exhibit such tendencies with a regularity that puts Swiss watches to shame.
In the wake of the release of the Fed's meeting minutes, Reuters reported that "U.S. interest rates futures fell as. . .the record of its April meeting raised some concerns that it might tighten monetary policy sooner than previously thought." The unwinding of the $2.6 trillion large securities portfolio and the timing thereof have been the subjects of intense debates both within and without the Fed, and they have intensified as we approach the termination date of QE2 in six weeks' time. Some Fed members are not totally sold on the soundness of the U.S.' economic recovery, while others don't buy the idea that current inflationary manifestations are of a lasting nature.
In any case, market betting is now focusing on whether Fed action on rates comes in 2011 or perhaps a few weeks into 2012.