The Federal Open Market Committee will release its statement at 2:15pm et today. Given the uncertain condition of every market in the world, this figures to be the most important Fed announcement since the dark days of last summer, if not the financial crisis of 2008.
Fed Chairman Ben Bernanke will not make a statement nor hold a press conference after today's meeting. There will merely be four or five poorly worded paragraphs posted to the Fed's website and released to news wires at or around 2:15. Those words will be studied by traders as fervently as Talmudic scholars pore over the Old Testament.
Anyone who tells you they know what the Fed is going to say is lying. The question isn't what the Fed will say, but rather what can the Fed or anyone else can do to soothe the markets. To help, Breakout welcomed John Lewis, the Managing Director of New Albany Capital Partners.
No speculation regarding the Fed's battle plan can be had these days without addressing the elephant in the markets: Is the Fed going to start QE3 and what would it mean for markets?
Lewis thinks any additional Quantitative Easing would be pointless at best, and damaging at worst. We don't "need help getting a flatter yield curve," notes Lewis, suggesting that more QE would be met with skepticism. Not all of the quantitative easing in the world would create jobs.
The jobs observation and pointless nature of more stimulus is the essence of the "Fed in a Box" concept. The Fed has the option of doing whatever they want but their ability to control what truly ails the economy, specifically unemployment, is limited. Artificial or not, rates are historically low and seem to care not a whit about ratings agency downgrades. Corporations are up to their gills in cash and potential employees are waiting. The shovels are ready but the jobs are not. Why? Confidence.
Corporations are reluctant to spend because they don't believe end demand will be there. And the corporations have a point. Federal efforts to create infrastructure building jobs are being stymied, either at a local level or due to ineptitude somewhere along the line from the term "shovel ready" being a campaign platitude and the point at which an American is actually paid for working. According to Nielsen 58% of online consumers think we're in a recession. Who would I be to disagree?
Confidence isn't a matter of puffing our chests in pride or having the guts to approach an attractive girl. Confidence is putting your absurdly high-paying job on the line investing in a plant or project which is going to come on-line in the midst of a lost decade that's morphed into a lost generation.
The Fed can't solve that in a statement today or tomorrow. Confidence is solved from the top down. As it stands now, that's the most disheartening economic fact of all.
Disclosure: Despite having deep conviction in all of the above I bought stocks this morning. I went straight ETFs; the Spyders (SPY) and Q's (QQQ). There are trading opportunities and deep fear for the future; near the twain the two meet. I share in the interest of disclosure. I bought well above the morning's lows and roughly where I bought yesterday. Not advice; simply an update of where I stand.