QE2 Announcement Expected Today: Look Out!

So, today is the day, and thank goodness gracious it has finally arrived. Afterall, I was getting awfully tired of commenting on QE2. At 11:15 PST today, Ben Bernanke will announce the amount of destruction he intends to levy against the US dollar. The consensus expectation has now moved into the $500B range with $100B in monthly installments over the next 5-6 months with the express optionality to increase the program should it prove necessary in future months. The extended period language surrounding interest rates is also expected to be repeated (surprise, surprise...).

What will be interesting is whether or not the market decides to sell this news. Many were (and some still are) hoping for a $1T QE2 (QE1 was $1.8T). So, $500 or less may be seen as a disappointment for those equity bulls who hoped for nothing more than the complete and utter debasement of the USD.

My advice to anyone who would listen was to be very cautious heading into today's announcement. Positioning with too much of a directional bias is unnecessary while the stakes are so high...

Also today, we saw the majority of the results of the midterm elections. The Republicans have not surprisingly taken control of the House and have gained seats in the Senate. With gridlock guaranteed, we can all forget about the idea of having another round of fiscal stimulus, which is still what I believe the country most desparately needs. Sure, QE2 may add to the bonus pool at Goldman Sachs, but fiscal stimulus might actually be able to create jobs, rebuild the nation's crumbling infrastructure, launch the US into the race (against China) for green tech, etc. But alas, we will have at least two years of a do-nothing Congress that will likely be focused more on finding a way to smear our president (Remember Newt's '94 Congress?) than it will be on creating jobs and economic relief for suffering Americans.

The market is down a touch this morning. Probably the result of profit taking ahead of an uncertain Fed announcement and also an acknowledgment of congressional gridlock.