I love FOMC Day!
From the moment I wake up, my stomach is filled with butterflies, really pretty purple and pink ones, as I look forward to the 2 o’clock hour. At this appointed hour, the chairman of the world’s most secretive monetary institution descends from on high with his stone tablets, which are emblazoned with the most important number on earth, the Target Fed Funds Rate.
Don’t kid yourselves, everything that happens around the planet will be based on what that target rate is, from the contract negotiations of Canadian hockey players to the nominal cost of lentil beans in the Zanzibar marketplace.
Your girlfriend will use this rate as a metric to judge the caliber of restaurant you take her to this weekend and your dog will either love you more or less as a result of the accompanying commentary as repeated on-air by CNBC’s Hampton Pearson.
According to Fed Lore, Hillary Clinton was once asked by Andrea Mitchell, the wife of then-Fed Chairman Alan Greenspan, what it was like to be married to the most powerful man in the world. Hillary replied, “You tell me!”
Not excited yet? I’ll juice you up even more…
Today’s commentary by and reception of Ben Bernanke carries all the significance of whether or not the groundhog sees his shadow on February 2nd. This is make or break stuff for the bearded prophet of liquidity. Economists are beginning to rally around Bernanke and his efforts even as public opinion of the Federal Reserve is now lower than that of the IRS. Will he be reappointed by Obama in January when his term expires? Won’t he? The drama! The suspense!
Fed Day gets me fired up. I spent yesterday afternoon trying to round up 15 other guys so that we could paint our torsos with the words:
Q U A N T I T A T I V E E A S I N G
but apparently, not everyone is as into this type of thing as I am. Sigh.
Anyway, It’s On like Donkey Kong this afternoon.
There will be rallies, there will be sell-offs, there will be knee-jerk reactions – there will be knee-jerk reactions to the knee-jerk reactions.
But by 2:30 pm, a mere 15 minutes after the proclamation, there will be consensus.
Yes, the market will require 15 minutes or so to decide how it wants to interpret the statement, and as the big money either plows in or heads for the exits, the rest of the market will follow suit, leading to some type of extreme either way.
Sometimes the reaction is subdued, but given the environment, I don’t believe that will be the case today.
Place your bets or just watch from the luxury box. This should be a good one.
BTW, Bloomberg tells us what to look and listen for right here: Fed May Recognize Faster Growth (Bloomberg)
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