The Spoiled Child is Learning

I’m sure you’ve read and heard enough about about yesterday’s FOMC release and attendant press conference so I won’t bore you with more.

I’ll just quickly say the most important three points are these:

1. Bernanke stuck to his guns and tried to strike the right balance between hawk and dove. He didn’t give back any of the ground he gained in late May and the markets – spoiled brats that they are – will have to get used to it and learn. This may require a deeper correction but so be it.

2. Everyone is taking from the statement and Q&A exactly what they want to. Some strategists are saying “in no way was this not dovish” and some are inferring that it was “a lot more hawkish than expectations.”  This is a stupid game with no way to win so I’m not playing.

3. Bernanke himself to you what the bottom line was – and it’s not much different than it always has been:

“the key point I’ve tried to make today is that our policies are tied to how the outlook evolves, and that should provide some comfort to markets because they will understand — I hope — that we will be providing whatever support is necessary.”

There’s nothing much else to say about it – now we watch what happens. The market has already thrown a tantrum and may continue to. This is wonderful for short-term traders and it provides opportunity for intermediate- to long-term investors.

“But what if stocks keep falling? Will the Fed rescue the rally?”

Rescue the rally? Why should anyone want that to happen? If you view an increase in volatility and lower stock prices as a negative and your time horizon is five years or more, you may want to turn your investing over to someone else.