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Bring on the Bernanke Put!

Submitted by madhedgefundtrader on 09/30/2010 23:47 -0400

It is now clear that the Fed’s unprecedented message last week implying that public enemy number was deflation, not inflation, has given a green light to global risk accumulation of every description. Any further slowdown in the economy will now be met with aggressive quantitative easing. Although I don’t spend vast amounts of time dissecting Fed statements, the words are unequivocal:

"The Committee will continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate."

Never was so much said by so few words.

It is rare that everything goes up at once, but that is exactly what we got, with stocks, bonds, foreign currencies, commodities all rallying hard. Coming into the fall, I did have some concerns that asset classes that performed well over the summer, like emerging stock markets, precious metals, and the grains, might sell off on any American stock market strength, as managers rotate money from outperforming groups to laggards.

It was not to be. On Friday, the 23 point leap in the S&P 500 was matched by gold punching through $1,300, silver hitting another 30 year high above $21, the grains tacking on 5%, and most emerging markets reaching either six month highs or all time highs.

Who was not invited to this love fest? Financial stocks, where a weak housing market continues to wreak havoc with balance sheets, whether they publicly admit it or not. The US dollar was also missing in action, since any quantitative easing is certain to fan the inflationary fires down the road. The euro has blasted through to a multi month high, and the British pound is threatening the same.

I warned readers that the markets were primed for a move like this (click here for “My Equity Scenario for the Rest of 2010” at http://www.madhedgefundtrader.com/september-1-2010-3.html ). All of the seasonal and historical indicators were predicting that in an election year like this one, six months of famine in the equity markets would then be followed by six months of feast. It looks like the S&P 500 now has a free pass to make a run to the 200 day moving average at 1,200, and possibly the high for the year at 1220. After that we’ll see how real this is, for stocks anyway.

Party away like there’s no tomorrow, but keep an eye on the door as usual, and keep snugging up those stops on US equities. Use the strength in long dated Treasuries to unload what you still own.

To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.

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Fri, 10/01/2010 - 10:59 | 618232 SteveNYC

Bring on the guillotine.

Fri, 10/01/2010 - 10:03 | 618029 Joeman34

Dont fight the Fed!

OT: Mad, what's your take on GMCR. I'm ITM on some puts, should I take profits or do you think the stock will fall further?

Fri, 10/01/2010 - 09:27 | 617951 tamboo

the bong's over here:

http://xmail.net/pbp/

dude's legit i shit you not.

Fri, 10/01/2010 - 08:51 | 617878 Instant Karma

With 0% interest rates, competitive currency debasement, and sluggish growth, the only thing holding back the economy and the stock market is the full retard mode in the White House. Were it not for the business-bashing anti-capitalism furor erupting from the White House, business would be hiring and stocks exploding upward. Like a coiled spring.

Fri, 10/01/2010 - 12:15 | 618466 Montgomery Burns

BWHAHAHAAAAAAA!

Fri, 10/01/2010 - 08:54 | 617884 Commander Cody

Must be karma overload.

Fri, 10/01/2010 - 08:14 | 617819 lewy14

Forget the Bernanke put. Bring on the Dancing Horses.

Shiver and say / the words / of every lie you've heard

First I'm gonna make it
Then I'm gonna break it
Till it falls apart
Hating all the faking
And shaking while I'm breaking
Your brittle heart

Fri, 10/01/2010 - 08:30 | 617847 Yorick7

Lewy, thanks for that link. Gosh it brings back the (rather hazy) memories of University, which shows my age. As for the Beranke put, yeah it's there but what if he gets stopped out?

Fri, 10/01/2010 - 08:37 | 617857 lewy14

If Bernanke gets stopped out, then Jesus is coming.

Do we hide the bong, or pass the bong?

I forget...

Fri, 10/01/2010 - 08:49 | 617871 El Hosel

Load it

Fri, 10/01/2010 - 09:10 | 617920 Yorick7

and pass it my way.

Fri, 10/01/2010 - 08:06 | 617807 Djirk

I guess the mandate for price stability only applies when there is deflation?

Let the bubbles go un abated and then "make" money when they crash. Wheee we are making money!

Fri, 10/01/2010 - 08:03 | 617803 tom

For once we completely agree. I was naive enough to think the Fed would disappoint the hedgies by holding back from committing to QE until home prices printed significantly lower, but boy was I wrong.

If everything's going up against the dollar, then nobody's gaining in real terms, except of course the hedgies whose performance fees are based on dollar valuation.

Fri, 10/01/2010 - 07:46 | 617792 Chartist

Financials, I believe, exceeded 20% of US GDP....Isn't that the magic threshhold for future underperformance?

Fri, 10/01/2010 - 07:42 | 617786 MarketTruth

Yes, and Bernanke also said he will support the stock market to ensure it does not crash. The problem is, Bernanke can not control the value of the dollar as it were. So sure the PRICE can stay the same or go higher, yet if the value of the US dollar goes down then you have lost 'money'.

+3% value in stocks MINUS 5% value decline of the dollar = -2%

Fri, 10/01/2010 - 09:49 | 618003 SheepDog-One

Yes at this point you need about a 1% daily pop in stocks just to keep value purchasing power? This is a terrible bet, the lunatics have it all to themselves.

Fri, 10/01/2010 - 08:57 | 617892 snowball777

Actually, 1 - (1.03 * 0.95) --> -2.15% (put that in your captcha and smoke it, TD)

Fri, 10/01/2010 - 07:54 | 617796 Clark_Griswold ...

amen!

Fri, 10/01/2010 - 02:47 | 617595 traderjoe

Seasonal and historical indicators mean nothing. The market's being manipulated. But the storm's a-brewin' (see the ran squawk ticker for Irish PMI sub-50, comments from Irish politician, IMF bloke, etc.). It's goin' to get interesting - one way or another.

So don't fall back on the election cycle bullsh*t. May you live in unusual times.

Fri, 10/01/2010 - 09:25 | 617950 Popo

Exactly. Let's not forget that the last crash pre-empted the elections

For everyone in Washington who wants smooth sailing until November, there's someone else who would love to see a shit storm prior to that.

Anyone playing the "full throttle until elections" game is playing a very dangerous game.

Risk fucking off.

Let the crazies have this round.

Fri, 10/01/2010 - 09:46 | 617996 SheepDog-One

I agree let the loonies have it, Im out and happy about it. Juggling hand grenades is for chumps.

Fri, 10/01/2010 - 11:53 | 618399 chopper read

but to where are you 'out', SheepDog? we're sitting ducks in our $US. cash is under attack by The Fed. Hence, the revaluation upward in US equities.

Fri, 10/01/2010 - 07:43 | 617788 El Hosel

"I warned readers that the markets were primed for a move like this"

SPY is today right where it was May 2010 just after the flash crash.... and where it was in 1998.

Only difference today is the warnings are coming from every direction, its all broken. The futile attempts to create the illusion of recovery at the expense of the real economy have eliminated the chance of a real recovery.

Thanks for the "warning".

Fri, 10/01/2010 - 00:26 | 617504 Minion

Professional Price Chasing!

Ring the cash register, my friends, because tomorrow is in the hands of madmen.

Fri, 10/01/2010 - 07:53 | 617795 NoBull1994

MadHedgeFundTrader is a fucking idiot.

Fri, 10/01/2010 - 11:49 | 618381 realitybiter

Come on. He told me that it was obvious that Obama's presidency was a success because the stock market had gone up. 'nuff said. It is hotter at noon than morning. Obvious global warming. Deficits don't matter. New paradigm. New word to accompany f-tard, fidiot

Fri, 10/01/2010 - 10:40 | 618157 spartan117

Why? His calls seem to be spot on lately.

Fri, 10/01/2010 - 12:06 | 618442 ATG

His calls seem to be spot on lately.

What are you smoking?

I warned readers that the markets were primed for a move like this (click here for “My Equity Scenario for the Rest of 2010” at http://www.madhedgefundtrader.com/september-1-2010-3.html ).

MHFT in fact called for SPX 950 before any up move AFTER the midterm elections.

Fri, 10/01/2010 - 12:28 | 618502 rocker

Whoops

Fri, 10/01/2010 - 11:02 | 618242 Edward G. Rendell

Lately results are no predictor of soon performance.

Fri, 10/01/2010 - 11:22 | 618295 Ripped Chunk

Viscious group here today.

Fri, 10/01/2010 - 08:24 | 617833 HelluvaEngineer

Is there a way to automatically append that "full retard" movie poster to all his posts?

Bring on the Bernanke Put!

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