[This message came from Kim B – a SpikeTrade who has just earned her Bank Robbery Award – Alex]

Bernanke’s Fed are likely to announce what they are going to do about Quantitative Easing at the next meeting on Nov 2-3. It appears that this market (at least parts of it) have already factored in the Quantitative Easing, so that any disappointment on this score might bring the markets down hard.

Although shipping stocks have been lagging and may well rise if the quarrel with China is resolved, other stocks, commodities, and ETF’s are relatively high and have room to fall. The aftermath of the G20, so far, seems to be that the US will keep devaluing the dollar until China softens its stance on keeping the yuan low. But if the country and the markets become “surprised” to hear at next week’s Fed meeting that there is NOT to be adequate “quantitative easing,” that might swing the elections against the current administration. It appears GS is “gunning” for a fall with short positions….

A negative surprise in the Federal stimulus plans could potentially produce a rout, as the timing of that would disappoint stock markets that are already destabilized by elections uncertainty. If that happened simultaneously with elections, it could severely harm the current administration’s chances of re-election in two years. I tend to believe that there will be devaluation of the dollar in the face of intransigence by the Chinese.

Kim B