Tongue Tied Fed Makes For No Easy Decisions

The markets are aware that too much free or nearly free money is going to cause trouble. Japan's equity indices saw it first hand this week when their main stock market fell -7.9% during one session. All one has to do is look at our central banks – they seem to be single-mindedly focusing on CPI and jobs while totally disregarding the by-product of quantitative easing – asset inflation. Not making decisions any easier is when a central bank, like the Federal Reserve, is having trouble explaining itself.

Monetary policy action has the Bank of Japan and the Fed creating "money monsters pits." Any intraday equity index drop greater than -5% is a stern market reminder that once a specific asset class has been crammed with copious amounts of cash, then the withdrawal of profits from a move towards "less" accommodation signal, like Bernanke hinted to mid-week, can and will always cause a massive headache to investors because of the "immense volatility" that the rush creates. ...