So we sit here in front of our trading terminals as we wait for QE3. That is the unfortunate outcome for day traders with limited information and unlimited uncertainty in the aftermath of Ben Bernanke’s 2011 Jackson Hole speech. The additional economic burden resulting from hurricane Irene (among the top 10 most expensive natural disasters) will be borne in part by insurers and in part by tax-payers via Government disaster relief.
Economic Disruption Post Irene
Spending (short term) is a good thing here, as it will fill some of the hole caused by the economic disruption disasters cause. Mercifully the storm claimed few lives, but the storm has been most destructive by way of claiming livelihoods. Gas stations, restaurants, hotels, and other small businesses dotted throughout the Atlantic coast and New England have been severely disrupted. Fear not about New Englanders, they’re a rugged bunch and clean up efforts are already well underway. Standing up after getting knocked down is just what New Englanders do after all. I can’t speak for the attitude of other regions affected by the storm but it will be disruptive to several industries including notably gasoline refining.
Will They or Won’t They Launch QE3?
Everyone I talk to and or read is saying QE3 is on, likely beginning shortly after the September meeting. I’ll be looking forward to reading more Fed POMO schedules. Great for binary options trading, for what it’s worth. Based on what reports have come out regarding the August Fed meeting minutes, it sure sounded like more quantitative easing was on the way, and that was BEFORE the economically disruptive event named Irene. I think you can take it to the bank that QE3 is on the way in September. I’m not certain whether they have the resources in place to announce and act on QE3 sooner, but I think it’s a given now.
Will the Congress Do It’s Part?
Chairman Bernanke was extremely critical of Congress for playing a political game of chicken with the economy. You can BET the American public is fighting mad about the way events played out as well. Congress DOES need to cut spending LONG term. They need to find ways to do so without undermining the present sputtering economy. Further, they need to do it without pandering to idealogues. Lastly, they need to get it done YESTERDAY.
I ain’t holding my breath. Based on the 44.5 consumer confidence reading the other day, very few of my fellow Americans are conserving oxygen either.
Day Trading in the Vacuum Before QE3
The worst part of the failure to announce QE3 explicitly at Jackson Hole last Friday is that now traders without inside confirmation must trade in a vacuum. Economic indicators tell your brain that markets must fall, yet because of the dearth of volume (traders staying on the sidelines), market makers can more easily manipulate markets upward (the preferred direction of Bernanke & Co.). What the heck is a day trader supposed to do when fundamentals are prevented from being reflected in prices? Wait, I guess… like all the other day traders on the sidelines.