Buy Disappointment

I am uncertain what the markets are looking for from Bernanke. In the longer term I don't believe Bernanke can make much of a difference as interest rates are already quite low.

If Bernanke disappoints today I believe a sell off can likely be bought for a trade. There is very heavy put buying today and hence I believe people are a little too well prepared for a disappointment.


A said...

Market expected 2 things going into FOMC: 1) The twist and 2) Reduction in interest on excess reserves. #1 was deemed positive while #2 negative though only for banks. We got #1 roughly in the amount expected. Did not get #2, which should have acted as a support for banks. Yet the sell off (!) Just can't figure out.

frank r said...

Everybody expected everybody else to be expecting more, so when it was less, everybody sold because they expect everybody else to sell. Really quite simple.
[edit] I'm responding to A.