Here is Jan Hatzius' initial read on Bernanke speech. In a nutshell, Hatzius seems to believe that reading between the lines may mean Bernanke will not do QE2, and preserve some of the Fed's mystique, so that all those massive bond managers who get the Fed's data early appear to have a competitive advantage. Alas, they don't. And all those who believe the Fed at this point, now that fiscal stimulus is no longer an option and all out FX war has broken out, has any other option but to buy anything not nailed down, well, we would like to point them to the 9 upcoming POMO monetizations over the next 4 weeks. What is most troubling is that the market has now priced in not only that, excluding some intraday volatility especially on OpEx days, but the expansion of Fed proxy buying of AAPL to $25 billion a week. Hatzius better hope that his attempt to restore some credibility to the Phantom of the Fed is grounded in reality. Because in the off chance he is right, buying a boatload of far OTM broad market puts on November 2 may well end up being the most profitable trade of the year, if not decade.
From Tungstenman Sachs: "Our view remains that the Federal Open Market Committee (FOMC) will once again ease monetary policy via unconventional measures in late 2010 or early 2011. Our views have not changed, and today’s comment discusses them in Q&A form. We believe that purchases of US Treasury securities cumulating to $1 trillion or more are the most likely cornerstone of the program; that the September 21 FOMC meeting is probably too early for a big announcement, but that November 2-3 is a possibility; and that it would likely “work” to a limited degree, perhaps boosting real GDP growth by a little under ½ percentage point per $1 trillion in purchases."
Jan Hatzius Presents His List Of Anticipated Fed Action Items Through November 2-3: None; Time To Sell On No Imminent QE2?Submitted by Tyler Durden on 08/24/2010 22:11 -0400
Goldman's Jan Hatzius explains why while he is still convinced that the Fed will ultimately have to undergo QE2, he presents the case why the Fed's hands are now most likely tied through its November 2-3 meeting (and why the J-Hole meeting will be a snoozer), at which point it will be too late for the market to benefit from monetary stimulus. The implication: very bearish for stocks, as Obama's only option for pumping up stocks in advance of the elections (monetary easing) is eliminated. With no means to implement a stock run up into the election (which would become a prompt self-fulfilling prophecy), the market is likely about to tumble.