Reality (and Ben Bernanke) hit the markets after the Fed's press conference.
From my perch, Bernanke's baseline Federal Reserve economic forecast -- like that of the more optimistic strategists on the "Street of Dreams" -- has become something of a leap of faith (requiring a quick pace of growth in the second half of this year).
My view remains that there is downside risk to his baseline forecast, owing to secular headwinds and the more important influence of consumer behavior (in an economic sense) following the investment and economic shocks of 2008-09.
Meanwhile, the Fed appears to be in a "zone of inaction" for the next few months so it will not likely be impact the market.
Market participants will now focus on the economic fundamentals and the corporate profits outlook -- without the benefit (over this period) of "The Bernanke Put."
Nearly 40% of the assets of the five largest US money market funds are invested in European bank debt!
Bonds trade like the Fed's next move is to put an artificial ceiling on interest rates.
The outcome of the pro-Papandreou vote was fully expected and the "heavy lifting" of passing austerity measures now faces Greece.
Will a temporary plan delay the inevitability of default? Possibly, but not for long.
By means of background, when Lehman's CDS blew through 600 several years ago it implied trouble -- Greek CDS now trade at 1800!
In the fullness of time Greece will follow the 12 other sovereign defaults that occurred over the last 12 years.
Greece and Taxes
"Yesterday, new Greek Finance Minister Evangelos Venizelos said that a top priority of the Greek government would be to implement a new tax system. The new system should focus on ending tax evasion." -- Citigroup Sovereign Debt Crisis Research Today.
The above quote sort of summarizes the XXXX show in Greece, doesn't it?