Door #3, market rallies as FED continues its vigilence over inflation.
Can you spell c-o-n-u-n-d-r-u-m. I thought you could. Now repeat 3 times, I will not fight the yield curve. Gee, a lot thats done, I guess, TTID. (this time its different).
Caught a "private equity" fund manager on boob tube today. Guy sold his internet biz to EBAY in 2000 so it makes him a market guru today. Says this rally is saudi fund managers putting petro dollars to work. Could be, but I thought they were buying the T-Note? Theory is the same, world consumption of oil brings riches to Saudi Princes, who buy our securities, which keeps down interest rates, which increases consumption. And so on and so on. So I guess until oil hits $35 again, we are in a bull market. Interesting fact he brought up that they do not buy oil stocks. Hmmm, OIH underperformed today, maybe.
If you want to see how far the FED can go, check out Volcker's crew in the '70s. Fun stuff.