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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: GROUND ZERO™ who wrote (73471)	7/11/2006 11:47:25 AM
From: Real Man	Respond to of 94695

Yes, I suspect that too. Personally I think the Fed is trapped at this point. All they can do is set short-term rates and print. If they inject more liquidity, we'll see more inflation, lower dollar, which could snowball into foreigners selling treasuries and agencies. If they drain and raise, well, that could pop one of the bubbles of their creation. I think they will continue to do securities lending and pass $ under the table to prop various bubbles they created, while talking about fighting inflation. However, pretty soon a critical point should arrive, when it's not enough to just talk. I think we are there, but I may be wrong. They won't let it go without a big fight, one that's going on right now. So far they managed to keep foreigners from selling by just talking, although they are not buying much now either. They did not do 50bp, as some feared (expected) after the tough talk, which could hurt their credibility with the foreign bond buyers.They flip from tough to easy talk all the time, which also hurts credibility. Confidence is the main thing in bubble markets. I think the markets are in the process of losing confidence in the Fed. They drained today so far, but we'll see what they do at lunchtime. Short term it's the earnings season, so that's what will drive the markets. I think earnings could still be pretty good.