Taper Caper: Conspiracy Theory Last Thursday, prior to the FOMC announcement, I was invited to come sit with another group of friends and traders everyone was sure there would be some type of tapering. That message had been clearly communicated to the markets. When the announcement came, the telephones went off and everyone erupted with various forms of surprise. I fully admit to being speechless. I kept waiting for some kind of explanation, and none came. The more we talked about it and the more I thought about it later, the more convinced I became that this was one of the more ham-handed policy announcements from the Fed in a very long time. Why would you go to the trouble of getting the … [Read more...]
Rising Inflation vs. FED Tapering
Up until recently we rarely heard the word "tapering" but now it seems to be everywhere. Why? Because in June FED chairman Ben Bernanke floated a "trial balloon" and mentioned "tapering". By this he meant that he was considering slowly closing the faucet that is currently gushing easy money, i.e. $85 billion a MONTH. The stock markets promptly had a temper tantrum and Bernanke blinked and said, oh I was only kidding... I will eventually have to scale back but it won't happen any time soon... don't worry. He also said that the Fed's 6.5% target for US unemployment should be considered a "threshold, not a trigger" and that the FED would continue to support the economic recovery, "even as the … [Read more...]
