No One Important Expects QE From Jackson Hole

Let me play the devil’s advocate and say that, after the Fed disappointed earlier this year, no one is left expecting any further easing before the end of 2012.

The election is simply too close at hand. Bernanke moving here is not feasible. There is no such thing as “autonomy”. Fed independence is a myth.

I thought we might actually get some action back in July – if only for a second, the possibility seemed plausible to me.

But here, just two months away from the presidential elections, taking action would result in making the Fed the single target of Republican’s ire. They would launch an endless assault on the institution. Any other time, the fiscal conservatives would complain, but the social conservatives would turn a def ear (social conservative absolutely love fraudulent money to spend – on their terms…).

If Ben moves now, the entire GOP establishment would feel threatened. They would act in unision to take him down. Bernanke cannot risk the central bank’s freedom to determine monetary policy.

And I think we all pretty much agree on that point here and now. Despite the rabble rousing murmurs starting to usher from “the media”, most sensible people who actually have skin in the game aren’t expecting anything from Ben. When he doesn’t act, news personalities will begin doomsaying and dark prophesizing, only to watch the market action shrug off the event. Financial journalists will look stupid, again, and life will go on.

This is not a catalyst for a big reversal. I think that if a selloff materializes this year, it will come in October as the “election year stats trade” falls apart; that’s not scientific, it is simply the outcome that leaves the most people looking dumb caught with thumbs up their asses.

But generally, I am prepared to hold fast, with a big cash position. I don’t want to bet on downside until 2013.