Bernanke: If we don’t do some form of QE/Operation Twist, the stock market will fall 5%
Yellen: Ben is right, the only option is more easing
Bernanke: ok, it’s settled, I’ve marked you all down in favor, no take-backs, see you August 1.
*some grumbling from the hawks as Bernanke walks out of the room.
Once, just once, I want Bernanke to disappoint the market and show some restraint. This would be a good time for that but the trend is your friend and you never bet against a dove.
Gold, commodities and CAD would be among the biggest winners if they cut. Even if the Fed only does Twist#2, the market will price in QE3 in a few months, so the effect will be the same.
