Benjamin Bernanke: Demi-God or Graduate and VIX Melt-ups
Mr.Braddock: “Ben, this whole idea sounds a little half-baked.” Benjamin Braddock (Dustin Hoffman): “No it’s not. It’s completely baked.” (Change ‘Braddock’ for ‘Bernanke’ and you get the idea…)
Half-baked policy is much like a soufflé – when to take it away from the heat? Recently the economic debate has been focused on future demand (or the lack of it) – what happens when the kitchen is like a frozen wasteland? That soufflé is doomed to deflate quickly as the lack of any expansive Fiscal Policy warmth becomes cold reality. Lemmings & Cliffs go together – whether fiscal or not. Ben knows that the only way to keep his soufflé on the menu is to keep the oven door firmly closed (debt/gdp ratio) & so the naked Emperor becomes the naked Chef… as such the FOMC meeting appears on the face of it to be a mere formality – surely even our most courageous of heli- pilots would not attempt to take-off from such a political platform. That’s not a green light for smashing volatility though as 1)the FED are beginning to be seen as increasingly split (self preservation in front of a Mitt witch hunt a possible cause) and 2)the fact that Vol is low already. There are, however, a few things that probably will happen, even if we will not get the full picture until the minutes come out on Nov 14th…..check k out the charts p2…stocks look ready to roll over and reflected in OTM plays in short-ends (see option flow below).
RBC strategists: “Characterization of the economy should remain one of “modest” growth while inflation language could shift marginally more hawkish given the recent run-up in headline CPI and the fact that it looks poised to accelerate further. The rub here, however, is that inflation expectations have actually drifted lower in recent months and the committee will cling to this as a sign that price pressures will remain contained.”
Credit Suisse economists added: “A different conversation at the September 12-13 meeting concerned whether the FOMC should develop a single consensus economic forecast – perhaps in lieu of central tendency ranges? Implementation challenges to such plan include 1) choosing the monetary policy assumptions underlying the consensus forecast and 2) deciding how FOMC participants can express their endorsement of the forecast (or lack thereof).”
The above ref. the last FED release: “Most participants agreed that the use of numerical thresholds could be useful to provide more clarity about the conditionality of the forward guidance” sure Benjamin….. try telling that to an Italian seismologist today…..
VIX ready to melt-up…
VIX Index continues higher and breaks the 1yr trend line. Continue running long from 13/14 entry. We saw the Dec 32.5 call trading 12k times today for 0.53 points and with a 15 delta – you can have better value if you buy the Dec 25/35 call spread for 0.50, that has a 16 delta on and you’re much faster in the money….
And longer term…
- Bernanke’s blind side
- The gold price looking to close at a 7 week high after Ben Bernanke say’s he’s ready to print
- Video: If Geithner was wrong – what about Ben Bernanke?
- Still Suicide Shopping to Ben Bernanke’s Last Dance
- Ron Paul’s farewell address to Ben Bernanke – saving the very best for last
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