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. 

Please, Sir: Ease, Sir!

The market's resounding with pleas
From New York to the Brits and Chinese
For a positive trend,

By which they depend

On the Fed to continue to ease. 

For the Index to keep hitting highs,

It's important to all of those guys

In the trading salons,

As they're dealing in bonds, 

That the Fed Open Market Desk buys. 

Investors have reason to sob less

And fear for their balance at Schwab less

If the Fed will agree

To stick with QE

'Til there's 6 1/2% jobless. 

Around the world, stocks have surged to new highs following Federal Reserve Chairman Ben Bernanke's assurances of further monetary stimulus. On Wednesday, speaking at a conference organized by the National Bureau of Economic Research, Bernanke observed that "you can only conclude that highly accommodative monetary policy for the foreseeable future is what's needed in the US economy." These words gave a shot of comfort to global markets that, for the last two months, had been obsessed with the timing of eventual "tapering". 

The resulting Wednesday afternoon rally in US equities carried through to Thursday morning in Frankfurt, Paris and London, before caroming back to New York for a second day. The S&P 500 has now reached a new record, and the Dow Jones Industrial Average may soon follow suit. 

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On a side note, I am happy to resume this little hobby of economic verses, following a two-month hiatus in which I found and adjusted to a demanding new job. Thanks to all those who enquired after my welfare during that time, and who expressed their desire for the return of Limericks Économiques. I hope they don't disappoint.