Wednesday, August 1, 2012

Why the markets did not tank today?

Some of my friends are asking this question. First, the Fed did build up even greater expectation that they will likely intervene soon. September will be the likely date; otherwise any later day would make Republicans blame Bernanke, who is a Republican, for helping Obama. This effect will hold the market for the next month so as not to completely fall out of bottom. Second, Draghi has built up high expectations of ECB intervention and has had some effect. They are expected to clarify tomorrow, but I am sure it will be some boilerplate stuff again when push comes to shovel.