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The Stock Market, The Sopranos, and My Crazy Dream About the US Fed


With the death of James Gandolfini in the news, my troubled subconscious mind merged two of its preoccupations. Up for some dream analysis?

However, in trading, there's an axiom that goes, "The trend is your friend." Again, I want to reiterate that I humbly believe that the bulls will have to reclaim the vaunted uptrend line at 1625 on the S&P and confirm that level again with at least two closes above to sustain this week's rally in equities. But when I try to figure out why we have started to stabilize again and why credit spreads have begun to tighten again, I cannot help but think that the primary factor in this week's price action can be traced back to "Fed speak." In this context, I can segue to my dream.

My Dream

I want to share this dream with you because it encompassed Ben Bernanke and the Fed being in The Sopranos, Episode #87, "The Reunion." I preface this by saying that I'm a huge James Gandolfini fan and so, by extension, I was a huge Sopranos fan. So I presume that this dream was also a result of James Gandolfini's passing.

It started with Ben Bernanke concluding his press conference on June 19, scurrying backstage and leaning on a table with sweat dripping down his brow. He was visibly shaken. He then eschewed the advances of the press behind closed doors, grabbed Hilsenrath by the arm, and whisked him to an old Ford plumbing truck waiting in the rear of the building. At the wheel was Minnesota Fed President Narayana Kocherlakota, a dove with a capital D.

Bernanke turned to Kocherlakota, and just said, "Start driving." After a few minutes of awkward silence, he then said, "I really screwed [expletive] up." Kocherlakota retorted, "I could not agree more." All the while, Hilsenrath was in the back of the plumbing truck, chained to its side. I could only hear the din of his mumbles and kicks coming from the back. Bernanke indignantly banged on the backside of the cabin and yelled, "Shut up, Jon! I cannot think!"

Kocherlakota continued, "What were you thinking, Ben? I mean, what were you thinking? We need to realize our [the Fed] forecasts have a track record like that of Washington and social programs. This market right now -- and the world, for that matter -- are so pumped up on our juice. We're not ready for this!" Bernanke said, "I know, I know... but it has to end sometime. On some level, damn it, we need to distance ourselves from inflating asset prices. But, on a personal level, I'm more worried about our friends in New Jersey. You know, 'them.'" Kocherlakota said, "Why, what did you tell 'them'? I had thought you were out of that loop." Bernanke responded, "I told them to get long the back end of the curve. My verbiage was intended to take some air and excess liquidity out of certain aspects of the market, but investors will sit back and say that at the end of the day, they will have the best of both worlds. If things are not so good, we will keep buying. If things get better, we will taper. Hilsy [addressing Jon Hilsenrath, still in the back of the truck], shut up! I will tell you when you can speak!"

Kocherlakota gripped the wheel really tightly and continued, "Ben, what are you saying?" Bernanke replied, "I told you. I told the head of what may be the most powerful crime family on Earth, a guy who does not know the difference between a bond or a stock, to load up on longer dated US Treasuries." Kocherlakota let out a gasp and simply said, "Oh boy." Bernanke then instructed him to pull into a roadside Motel 8, on the outskirts of Washington, DC. Then Bernanke and Kocherlakota led Hilsenrath into a dingy, dimly lit room, pulled out a bottle of Teacher's Scotch (my father-in-law drinks that), and locked the door.
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