The script continues. Every time markets get in trouble, the fed starts the easy money rhetoric. If it doesn’t work a first time, try a second time. Two days ago, it was Bullard. Yesterday, it was Evans. None of this is by accident.

Here is  how we believe this plays out:

If markets ignore the 2nd attempt by the fed to stanch the bleeding, we suspect there will be a louder attempt at rhetoric, maybe something to the effect of using the word “imminent!” If that doesn’t work, expect them to take action before the next meeting. After all, it should be evident now it is all abpout the markets for these people. After all, the meeting is Sept-25-26…a long way away. They will not wait that long if markets do not cooperate.

If markets do cooperate with the fed rhetoric, they will be able to wait but it is a mortal lock of  rate cuts at the September meeting. Just keep in mind, if rates stay where they are in the market, a rate cut is meaningless as the market is way head of the fed…or putting it better, the fed is way behind the market.

As far as yesterday, just an very very very oversold market rally. We were oversold but foreign markets a lot worse. Emerging market stocks have been bludgeoned. They have to bounce somewhere. At this juncture, we will know more on how this bounce plays out. If it fails quickly, not good.

As far as rates, the bond bubble may be in the climactic stage. This occurs when maniacal investors buy longer term bonds yielding negative…only to make money on capital gains…AFTER a gigantic bond market run. We also have to mention Austria was able to float a 100 year bond…at 1.2%. Repeat…100 years at 1.2%. But don’t worry, Powell tells us there are no bubbles.