It's all about Jackson Hole now. The Fed meeting this week and the press conference on Friday will basically define the future. The market seems to be betting on QE3 of some type, more treasury buying or something new, maybe we'll just start paying taxes directly to Citi cut out the middle man. I think it can go a couple different ways.
1. New "spending" is not really politically feasible right now as congress barely got the debt ceiling through, so I'm doubting they let the Fed increase it's balance sheet at all. So Friday comes and the Fed does nothing and the market falls off a cliff and then the next day congress acts to save the day because no one gets reelected when the market crashes. Basically the same thing that happened with TARP where congress votes no Dow drops 700 points and then the next day it gets voted through.
2. Fed just does it anyway and congress goes crazy, but the market fly's up and so everybody just lets it go because people do get reelected when the market soars.
So basically I don't see any one making any real big moves until Friday, assuming a European bank doesn't collapse by then.
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