As fans of the show Breaking Bad can attest, when it comes to the illegal drug trade, few things matter more than purity. Mess with that and you not only risk angering your customers, but you're playing with fire too.
In a similar fashion, the past four years have seen a good portion of the investing crowd getting hooked on the Fed's stimulus policies, the most recent of which is $85 billion a month being pumped into the bond market. But now that Fed chief Ben Bernanke and his peers are poised this week to start watering down the purity of the program, many investors are understandably quite nervous about the disruptions a so-called tapering could cause.
"I think the Fed is desperate to get going on it," says Bob Doll, chief equity strategist at Nuveen Asset Management in the attached video. "I think they're anxious to get on with it."
For one, he says the need to ease is no longer there since the deficit has shrunk so much, and secondly he is of the mind that most FOMC members would agree with him that the bond-buying program is "expensive" and "hasn't worked all that well."
As a result, Doll thinks when the Fed's statement comes out Wednesday afternoon we'll see something in the neighborhood of a $10 billion haircut.
"Eventually, we'll forget all about it," Doll says about the months of hype and speculation that have dominated markets since late May. "It'll be a non-issue before long."
That's part of the reason why he is more invested in what the Fed says and sees about the economy, interest rates and housing than the degree to which it tampers with the purity of the market's favorite fuel.
"I want to hear that the Fed gets the big picture, that the U.S. is improving, that we're seeing some signs of improvement outside the U.S.," he says, adding they're still fully aware of all the credit needs and ailing housing market.
"They've got to do the balancing act."
Programming Note: Be sure to catch our live post-Fed coverage on Thursday September 19 at 9:25am/est.
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