Art Cashin On QE2 As A Religulous Experience - "If You Have Faith, It Will Happen"
In a country rules by Hopium, is it any surprise that capital markets are now governed by faith (in the destruction of the country by one Ben Bernanke). Art Cashin spots the irony of investing in anticipation of religulous rapture:
The prospect of the Fed embarking on another large asset buying program drove stocks and most commodities sharply higher Wednesday.
They roared out of the gate at the opening bell and never looked back.
While the list of skeptics on either the efficacy or beneficial effects of a new QE2 seemed to grow by the minute, it retained enough true believers to raise the prices of lots of assets. Some compared the belief in the beneficial effects to come from QE 2 to a religious experience. Others saw it as either hypnotic or narcotic. If you have faith – it will happen.
It was all about faith; after all, since the Fed had not only not begun the process, they haven’t formally confirmed that there will be a QE 2. Talk about the power of jaw-boning.
And as we highlighted earlier, those against QE2 are not just normal people who don't stand to benefit from endless cheap money (read: bankers, one pane removed from the Discount Window and POMO monetizations), but the Fed itself.
As we just noted, the list of those skeptical of the beneficial impact of QE 2 has grown in recent days. Steven Roach of Morgan Stanley, Niall Ferguson of Harvard, Kocherlakota of the Minneapolis Fed and even the St. Louis Fed’s newsletter. While these skeptics proved it was okay to doubt the Fed, the market indicated it was suicidal to fight the Fed.
The asset inflation from a looming QE 2 wasn’t confined to the stock market. Gold, oil, copper and a long list of commodities all jumped higher.
In the afternoon, the rally in stocks slowed. The 10 year auction, while not as bad as Tuesday’s 3 year auction was mediocre at best. Treasury bonds began to slip lower.
For the next hour, the S&P struggled against resistance at 1182/1185. About 2:15, they topped out at 1184. Stocks began to drift lower led by the banks as concerns about the rat’s nest in foreclosures intensified.
By the bell, they had given back 30% of their earlier gains. Nonetheless, it was the fourth straight gain for stocks putting the averages at five month highs. The bulls remain on a roll.
What the Fed will end up doing on November 3, probably only Bill Gross knows. Yet one thing is certain - if at 2:15pm the FOMC statement headline scanning robots do no see confirmation of QE2, the market will plunge so fast it will force people to look back at the flash crash with nostalgia.
h/t London Dude Trader