Not that anyone should take this anymore than with a hefty dose of grain salt, but I spent the whole morning sifting through 6 differing economic teams' opinions on Jackson Hole.
The expectation and hope that has been built in is devastatingly reminiscent of the first meeting in 08 Congress had about the bailout - which they rejected. Lines of economic theory and research on the possibilities the Fed can use to stem the apparent paranoia that the markets will collapse are legion. Makes you wonder if the Fed actually does any work at all, considering the amount of work others have already done.
I cannot help but think that this market will, before 10am US time, price in some magnificent aerial rescue plan by the helicopter we all know and love. 40-50 point gain on the SPX is not out of the question.
But it will be finally a non-event. The key line will be "markets continue to remain resilient". As they have.
It's very hard to position yourself for this outcome, as the positions have to be enacted several minutes prior to his speech, and you have the wildcards of GDP numbers tonight.
Conventional wisdom dictates that one should stay out of the market. In saying that, assume everyone follows conventional wisdom, we have two scenarios:-
a) Ben disappoints. Those that made punts for a bullish surge will dump. Market gaps down and tanks. Those on their hands will wait. Sellers will build. Markets will fall. FAST.
b) Ben surprises on the upside, printing 396.669 metric tonnes of US-poly money, to be given out to single mums, caravan park hilly billys, sweatshop workers, used car salesmen, real estate agents, mortgage brokers and stockbrokers who work for Bank of America only. Markets will surge. And surge. Until those with their hands start jumping in. And then it will fall. And fall.
All in one day.
I won't do a Schiff to predict Armageddon tonight, although from memory Voltaire and some others have got tonight as some astrological Nostradamus inspired mega witching hour of power.
All I am saying is, be aware that tonight's speech by Ben is the most anticipated thing he has to say this year. Coupled with GDP and conflicting data trends (durable goods strong, jobs weak?) makes it true unknown.
Look at Asia today. Hong Kong's rallied 250 points from the opening, and gave it all back inside half an hour.
And when we look around - really why are they all so worried? Banks are still solvent. People still have jobs. People are still buying cars, houses, IPads, health insurance and margin loans. Markets aren't that pressured this week (with the exception of last nights magical tidal wave on the DAX). Why would they be worried enough to bank everything on this idiot's speech tonight?
Why indeed.....
Part 1: http://www.youtube.com/watch?v=dE-LDfroa1w&NR=1 Part 2: http://www.youtube.com/watch?v=Nay4VbUJl3E&NR=1
(20min delay)