Sept 20. Hoping for QE announcement at FOMC
The question of whether a new large round of QE is in the offing takes on heightened significance in front of tomorrow’s FOMC. Treasury option plays suggest many in the market are pinning their hopes on an imminent announcement. Almost certainly treasuries will sell off in disappointment if there isn’t QE. Gold will likely also sell off, though probably not as dramatically.
–Rumors circulated Friday (later officially denied) that Ireland may need help from the IMF. A weekend story said the ECB had to step in the provide support for Irish bonds, just another reminder that the EU continues to crumble around the edges.
–2/10 treasury curve is holding near the top of the recent range.
–Saw in Mauldin piece (citing Gary Shilling) that many companies have cut 401k matching programs. Also, several interesting notes from the Fed’s Flow of Funds report. First, net worth took a tumble of $1.5T in Q2. Secondly it is once again glaringly obvious that deleveraging by the private sector has been “plugged” by gov’t borrowing. However another story on ZH suggests that consumer deleveraging hasn’t been intentional, but rather forced by institutions cutting off credit and writing down “assets”. One of the main themes of Keynes is that inventories don’t necessarily equal INTENDED inventories. In the same way, debt cutbacks don’t necessarily equal intended cuts…suggests more pain on the way.
