Nothing Is Better Than Something

The Fed stirred up market festivity,
In spite of low business activity,
From the joy that relates
To their keeping the rates
At zero, as is their proclivity.

With rates so depressingly low,
Fixed income has nowhere to go
So the stock market beckons
To each one who reckons
The chance that their nest egg may grow. 

It highlights how hard to discern it is
To know when the bond market's turn it is,
But with rates to be found
At the null lower bound,
The Dow lacks investment alternatives.

Advance Draft of Next FOMC Statement

"If employment & prices are strong,

We can give up QE before long,

So we're tapering it,

But just by a bit,
In case we turn out to be wrong."

The drumbeat of tapering talk continues, with various members of the Fed Open Market Committee making public comments that suggest the question isn't "if", or even "when", but "how".  Expectations have begun to coalesce around the next FOMC meeting on September 17-18, in part because it is seen as advisable to remove the uncertainty surrounding the unwinding of QE before the White House announces the President's nominee to succeed Chairman Ben Bernanke. The current Chairman's term ends on January 31. 

Comments yesterday by James Bullard, president of the Federal Reserve Bank of St. Louis, put the spotlight on the tactics the Fed might employ when starting down the long, unwinding road: "A larger move would be interpreted as a faster pace of reduction," he said, while "a smaller move would be considered a more hedged bet, a slower rate of reduction in purchases." In other words, the FOMC could test the waters before making a big commitment to unwinding its extraordinary monetary stimulus.