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Sixteen Candles

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...my sense is that the FOMC will stick to the script.

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"That's why they call them crushes. If they were easy, they'd call them something else." Jim Baker


Good morning and welcome back to the flickering flack. Hump Day is here and it's ready to thrill as our fearless Fed leader hikes to the hill. With briefcase in hand and helicopters overhead, Boom Boom will step on stage for a coronation of sorts, the sixteenth straight interest rate nudge. With all due respect to John Hughes and the rest of the crew, it remains to be seen if this particular flick will have a happy ending. Samantha Baker sure hopes so but, alas, Samantha Baker married well.

While I don't have an actionable edge on today's spin, my sense is that the FOMC will stick to the script. Another 25 bips, thank you very much, and a data dependent "show me" policy that would make John Chambers proud. The simple, if unnerving, truth is that our policy makers don't seem to know any more than we do, as evidenced by the kitten whispers between Mr. Bernanke and Maria as they finished off their second glass of Chianti. Once upon a time, uncertainty was the death knell of the market and while we've been conditioned to buy dips, we must remember that history has a funny way of repeating itself.

As I opined yesterday on the Buzz, one of two things will happen this afternoon. Either the bulls will view this announcement as they did the jobs report, as the big, bad event that simply needs to pass, or the bears will wake up and smack the hope right off the bovine puss. I long for the trading days when it was that simple, when our collective metrics crafted an advantageous risk/reward and free markets were fair game. But these are different times with different agendas and, as the folks in Washington know, the stakes have never been higher for the lifestyles throughout our grand land.

John Succo opined yesterday that his "best guess" was that M3 (the once staid measure of money supply) was growing at an astounding 10%. I've known Succ for sixteen years--serendipity?--and he's not one to flippantly pick numbers out of thin air. The unfortunate truth is that there's no way to know--the powers that be have decided that M3 is no longer "necessary"--and the machinations of the market are a function of structural forces. Print more money, deflate our currency, and buoy the boat. That's the master plan, if you haven't picked up on it yet, but it doesn't come without flies. It is for that reason that we've been uber-aware of the buzz around the dollar and the banter in fixed income.

The tricky aspect of this particular juncture is that the technicals, by and large, point higher. The S&P, Trannies, Russell 2000, Mid-caps and the all-important banking complex are all at or near all-time highs. Further, as we've chronicled before and during the run, the energy and metal complexes are en fuego as copper ticked at $8000/ton for the first time ever while gold and silver enjoy 25 year+ highs. The bears would argue that we need technical validation to facilitate the path of maximum frustration and they might be right. I will simply say that we're walking a very tight rope and the slightest whiff of discontent could turn this tape into a tailspin. Keep your risk tight and your eyes open as we edge through this unique period in financial history. And think positive, Cookie, perspective provides clarity in an otherwise murky world.

Good luck today.


R.P.

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