This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Fed's Decision Is No Surprise

TheStreet Premium Services

A complimentary preview
of Options-Profits Previews

**Dan Collins is a 25-year veteran of the Futures industry and founder of the Dan Collins Report. After working on the trading floor of the Chicago Board of Trade and Chicago Mercantile Exchange where he serviced retail and institutional customers including major banks and cash arbitrage traders as well as locals, he went to Futures Magazine.**

When Federal Reserve Board Chairman clarified his comments regarding the Fed tapering its $85 billion in mortgage back securities and long-term bond purchases as part of QE3 after its June meeting the consensus seemed to target the September FOMC meeting as the most likely first reduction.

Bernanke left himself some room by simply saying tapering could begin by yearend and also tied any reduction in purchases to economic data. The most important data point is jobs and the jobs data since Bernanke's June press conference has been disappointing. The August report, despite a reduction in the headline unemployment rate, missed expectation for nonfarm payrolls and payroll figures for the previous two months were reduced by 74,000. And those months already failed to hit the important 200,000 mark. In my mind that tipped the balance towards no tapering in September and perhaps only a minor reduction at some point before the end of the year. Adding to the uncertainty was the Syrian situation, which has the potential to disrupt energy prices and markets in general.

That is why I was somewhat surprised by those claiming surprise the Fed held off. The market did rally on the news, which indicates there was some expectation of a tapering but has since sold off on the underlying reasons why the Fed could not pull the trigger. In fact equity markets sold off on the poor August jobs numbers then quickly recovered, which I assumed was a market reaction to at least one more month of.

I pointed out in my video with Jill Malandrino of Options Profits that the last thing the Fed wants to do is to reduce its purchases only to see further economic weakness and have to add back some purchases.

video platformvideo managementvideo solutionsvideo player

The Fed is now five years deep in its extraordinary policy moves, six years if you count the auction facilities it added in light bank solvency issues in 2007. They expanded access to its discount window, extended the terms to 30 days from overnight, reduced the Fed Funds rate to zero, pledged to keep rates there out several years, initiated QE1, QE2, Operation Twist and QE 3. It has done all this while talking up the economy, which it claims is in recovery while acknowledging the tepid nature of that recovery.

Quantitative easing is really its only remaining bullet and with Congress unwilling to provide any economic stimulus, the Fed will not be too willing to let go of its last remaining policy tool.

OptionsProfits can be followed on Twitter at

Dan Collins can be followed on Twitter at

EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
Top Rated Stocks Top Rated Funds Top Rated ETFs