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Fed To Crash Markets Before Launching QE3

Wednesday, August 29, 2012 6:38
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(Before It's News)

Posted by on Aug 29, 2012

 

Desperate to print Wiemar-style to fight off the most viscous Kondratiev Winter on record, Federal Reserve Chairman Ben Bernanke may not satisfy ‘inflation trade’ onlookers at the close of his Jackson Hole speech scheduled Friday. He may, instead, merely allow months of anticipatory front-running of stocks do the work of propping up asset prices for him.

And if investors don’t get the ‘all-systems go’ at Jackson Hole, there’s always the FOMC meeting of Sept. 12 & 13 to get the good news. That’s when market volatility could move off the charts, maybe extreme volatility to the downside, according some Wall Street analysts.

“With the equity market pricing in a significant chance of QE3, stock prices are no longer as useful a signal to Fed officials. Should the Fed disappoint at its September policy meeting, the risk of a stock sell-off is high,” Bank of America Merrill Lynch analysts wrote in a note to clients, Aug. 21.

 

“Some in the markets think that the Fed effectively targets equity prices, meaning that to predict Fed policy, one merely needs to track the U.S. stock market,” the analysts add. “There is a curious circularity to this view, however: the Fed will not launch QE3 so long as stock prices are high, yet the stock market is high because it anticipates QE3.”

The old adage on the Street, ‘buy the rumor, sell the fact’, may be at play here. But if Bernanke plays too-hard-to-get with investors in the coming weeks, a nasty fall could be in store for the Fed chief—a fall that could outright overwhelm the NY Fed’s PPT and result in a stock market plunge akin to the Crash of 1987. Maybe.

The chart of the S&P 500, Spanish IBEX 35 and Chinese SSEC shows the gaping chasm between U.S. stocks and two indexes represented by two economies with, again, divergent outlooks. Spain’s fiscal outlook in coming years isn’t much different from the federal budget outlook for the U.S., while the Chinese $3 trillion war chest of reserves couldn’t be in a better relative position to survive the righting of the bogus ‘World is Flat’ global agenda.

Would Bernanke risk a market meltdown that snaps the notion of an eternal ‘Bernanke put’? Is he that confident that the remaining holdouts of an obviously rigged market will plunge the world economy into the anticipated financial Armageddon—before a U.S. presidential election?

The answer may be a shocking, even cockamamy—YES and YES! And it may not be that much of a risk. A surprise ‘not yet’ to further money printing at Jackson Hole and the FOMC meeting could be forthcoming.

Consider the geopolitics in the Middle East, and contemplate the dire political tug-o-war between Israel’s Prime Minister Benjamin Netanyahu and U.S. President Barrack Obama regarding Iran. Netanyahu insists military action against Iran be taken before the U.S. election in November, while Obama remains adamant that the issue surrounding Iran must wait until after the election—a stand which probably infuriates the warmongering neocons and bankers, who have since put their stock on Republican candidate for president Mitt Romney as their next bankster puppet.

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