Wind or Meat?

it’s really simple:

Stock indices will react one way or the other to what Bernanke says Friday. Will he just talk the game, or outline actual steps that he will take?

Interestingly, we discussed recently that stimulus seems odd with stock indices testing highs. But now the focus is on unemployment. However, I don’t understand how the Fed buying treasury bonds is supposed to help a worker who lost their job due to modernization or such. These folks need new training, not a lowering of interest rates from 3.25% to 3%.

Nonetheless, he could go either way. If he outlines steps (and he did this in 2010) then the market and bonds power higher. If he is vague, we will get more short term weakness in markets – but not too much as most people theorize that if he doesn’t do some thing or announce something Friday, then a weakening stock market will force him to act.

So the prevailing thesis is he will act relatively soon, or very soon, but he will act. I expect short term gyrations either way as most traders will add or sell based on short term sentiment then reload either way. And I do expect something magical to come from the Fed and maybe the ECB.

My working hypothesis that we will need a mini crash to motivate central bankers, might still happen – but some smart people are disagreeing with me on timing. We’ll see.