IMAGINE. I COULD BE WRONG…AGAIN!

The Fed tapered again today in unanimous fashion, another $10 million in total.  It had been telegraphed for a while so it really wasn't much of a shock according to the Street but the DOW closed down 189+.  Now you can tell me all day long that the tapering had nothing to do with it and I wouldn't believe it.  It surely has contributed to the emerging market disruptions where investors have associated the Fed actions with higher interest rates on the long end and a lessening of liquidity globally.  reaction?  Sell the local currency and flee to safety.  This is certainly the reading put on the situation by emerging market pols charging that there is a concerted effort to crush asset prices in order to create fire sale conditions.  Then again, whilst the central bank heads were certainly aware of what the future would probably hold, the Christinas of the world were very happy to use hot money to fund self-created deficits.  But the underlying is true; the expectation of a lowering of liquidity, whether real or not, has spooked equities coupled with lackluster earnings and the suspicion that the great asset bubble of stock prices may just be poised for a puncture.

From the standpoint of politics, the stock market was the only thing going right for The Leader and a major correction in this, an election year, would not be a good thing for either himself or his party.  Which is why I still need to be convinced that Janet is going to follow up with a continuation of the new policy unless there is an improvement or reversal of the conditions we see today.  In case you missed it, The Leader didn't really help his own cause or remove market jitters with what could only be call an uninspired and uninteresting campaign speech dubbing for the State of the Union address last night.  Not quite dreadful but entirely forgettable.

The question I guess is how long is the emerging markets run going to continue and is there a chance of contagion?  Too soon to tell I think but while the damage of which the Argies or the Zulus are capable may not be much at this stage, Turkey is a real country and India is not insignificant.  If one remembers, all the bad stuff in 1987 started in Thailand for pity sakes and none of the present countries involved or those on the periphery have anything resembling the Fed or the Bank of England as a central bank.

So it looks as though we are going to have to adopt a "wait and see" attitude as to where this goes if anywhere.  One would think there is a better way to run the world but I guess not.  I'm not sure this is the best time (if there ever is one) to have multiple currency crises which might lead to global liquidity issues because this mob in D.C. is a long way from being the First Team and are anyway far more concerned with domestic  politics than with might be collapsing Over There or Anywhere.  The good news is it got up to +14F in the Fly-Over Zone today.  Gotta work on my sun tan.