Market Thoughts on Feb 2, 2012

Mr. Bernanke is on the Capitol Hill today, trying to persuade lawmakers that inflation is not to be worried about after FOMC "pedal to the metal" rate decision last week. I do not think congressmen are buying his notion, but more importantly, the market thinks that inflation is not going to stay subdued for too long. I compiled a chart to compare how various asset classes have performed since FOMC's 2-day meeting. You can see that precious metals are in heaven, and are adding some more as I type. Risk assets, in general, are up at the expense of the dollar. Treasuries are up due to Fed's continuing intervention and its grim economic outlook. Investment grade corporate bonds are up due to demand for yield, as the rates are going to stay at near 0% much longer.

click on chart to enlarge