Yeee Ha!

"If you think bull riding isn't intense, come sit on his back and try on my saddle.  This ain't for tenderfoots." - Clancy Jean Driscoll

With volatility picking up this week it is like riding a bull in the rodeo.  With 3 days of the past four (today has yet to really begin) and 6 of the past 8 having more than a 1% up or down day things are really rocking.  Volatility of this sort has not been seen in a while and shows a struggle between the bulls and the bears to establish domination.  The bulls are not going to give up without a fight and the bears expect a correction as the Federal Reserve's safety net has been removed.

Who will win is anyone's guess but if the past is any indication each time the Federal Reserve has removed the safety net the market has corrected at least 10%.  Each time this has happened they have stepped back into the arena to print more money and support the market.  The question is will they do it again and I have to believe that if there is a correction of that magnitude that they will.  Housing is still in the doldrums and although unemployment has fallen below 6% (according to the Federal Reserve) most Americans still feel like they are in a recession.  So the only metric that is working in the Feds favor is the meteoric rise of the stock market and I believe that barring any unforeseen circumstances that they will try to prop that up one more time.

The question is then how do they ever exit the quantitative easing strategy without there being any pain?  The answer of course is that there is no way out without causing some if not a large amount of pain.  The problem is that the American people vote with their wallets and so any pain will result in a change at the top and with an election year coming right up it will be interesting to see just how independent the Federal Reserve is.  Once again, if the past is any indication they will bend to the politicians but at some point this lunacy of printing money has to stop and as in all cases the sooner the better.