The Fed did the completely expected today, pledging to continue to expand its balance sheet in buying sovereign and mortgage debt at the pace of $85 billion per month until unemployment drops below 6.5% and/or inflation rises above 2.5%.
Considering that both measures are tacitly rigged and phony, that pretty much means that Benny will print until the exhaustion and collapse of the dollar, or until it suits their interests not to do it.
The only surprise in Benjy's press conference was that he grew up in rural South Carolina and goes back for visits. I didn't see that one coming.
The money shot today was when the male spokesmodel on Bloomberg said 'and gold is up only five dollars after that Fed announcement.' All that capping just to try and make the impression that QE until hell freezes over isn't inflationary? I hope it was worth it.
Stocks pulled back from the necklines on their inverse head and shoulders, and gold and silver rallied back, but the pop higher was pale in context because of the pounding the metals had taken for the past week. There were no big drops, but lots of cheap shots and quick hits.
So what next. It's all fiscal cliff now, all the time, until the end of the year. Or the real Mayan calendar end date, which is not 12-12-12 like so many think. It is 21 December 2012, which is also the last date by which legislation can be submitted to the US Congress for consideration this year. So if you are planning on the end the world, its time to RSVP.
I really cannot say what these fiscal cliff jokers are going to do, but I do know that Obama has the whip hand, even if it was ten years in the making, and after the previous twenty times that the Republicans used and abused his good will gestures in negotiating against himself, he is likely to let it ride.
The cliff is phony anyway, although I am sure it will be used as a looting opportunity on Wall Street.
Once the cliff passes, 70% of the deficit evaporates. Horrors! And they have plenty of time to tweak it in the new Congress so the effects are very unlikely to be lasting.
I am almost positive the US is heading into a recession next year anyway, the policy decisions are so cockeyed against the median wage earner and consumer. They might try and hide it by throwing money at it, and there lies stagflation, even if they hide the inflationary part.
El Cliffo Fiscal gives the Republicans political cover, because now the tax cuts expire and they cannot be blamed for raising taxes. So Grover and his bully boys cannot be madder than usual that they are not warlords in Somalia rather than citizens in a Republic. And then the Republicans can cut a deal and lower taxes somewhat and look like heroes.
I don't have a lot of confidence (lot = greater than zero) in Obama and the Dems making a decent deal for the American people. The Republicans are whores for the monied interests and are as bad or worse. I think it was Gore Vidal who said that the Dems and GOP are just two different wings of the Big Money Party, and that sounds about right.
So let's see what happens.
In the short term, the short side of a hedged stock/bullion pair seems like the thing to do.
