How Far Can The Fed Go?

Best Bet

The best bet last week was the least popular one: buying Wall Street’s “fear gauge,” the CBOE Volatility Index, or VIX.

One “mysterious trader” was reported to have made a multimillion-dollar bet that volatility (aka price swings) would rise for stocks.

We hope he stuck with it; it should have paid off big time. As it happened, the VIX did not merely go up; it spiked as high as 199%.

What happens next is anyone’s guess. But at least we know that the bear is awake… and on the prowl.

Where and when he will strike next waits to be seen.

Bipartisan Recklessness

In the meantime, we shift our attention to more predictable events. (We know they are more predictable because even we saw them coming.)

We refer to the way in which Democrats, Republicans, and the president are colluding to keep the cash flowing – to themselves, their clients, and their zombie pals.

At the end of last week, in a shameful act of bipartisan recklessness, Pelosi, Schumer, Ryan, and Trump got together not only to fund the government, but also to remove further obstacles to budget hikes.

Now, they are setting out for a wild night on the town – top down, four on the floor, a fifth under the seat… and wedding rings in their pockets.

The GOP tax cuts plus the recent bipartisan budget deal amounts to a fiscal stimulus of about 1.25% of GDP this year… and 2% of GDP over the next two years.

That’s more than the emergency stimulus passed by President George W. Bush in 2008 during what was supposed to be the worst economic crisis since the Great Depression.

It amounted to just 1% of GDP.

And it’s only slightly less, in GDP terms, than the “massive” emergency stimulus package passed by President Obama in 2009.

As far as we know, only one person – Senator Rand Paul – made any effort to stop them.

He warned that the GOP was betraying its roots and its responsibilities – which it clearly was.