The Twister…………Initial Reaction at 2:00 PM CDT
Focus today is on the FOMC’x Twist program of extending maturities of their holdings. To me this is primarily an attempt at doing something, however inconsequential, to make it appear that they are not powerless at this juncture. There is probably no point to it as Bernanke has already said that the problems affecting employment and the economy are structural and the administration and more importantly the Republicans in congress have to deal with it.
Initially the FOMC reaction seems to be good for the economy. Gold and commodities are under pressure and long term interest rates are declining even more compared to short-term rates. It would seem that for the moment speculators are being pushed back versus the real economy. That is good.
Stock market traders seem to be having trouble digesting the info however. That is probably due to the rally that we have seen over the past week and some back and filling is in order. Also the Gold / S&P 500 relationship has flatlined since 9/14 and is probably an indication that recently the same crowd has been buying stocks and gold for the same reason, ie QE III, which is not going to happen.