What do we get for $900B?  Every-ting you want.  Everything?  Every-ting.  So sock it to Bernanke because with QE2 the dollar got so thorny as the Fed loves printing money for a long time (note to any reader not brought up on bad rap music, this will make the prior reference marginally funny, it will also potentially make your ears bleed and your rhyming dictionary commit hari kari, because really, how else would a rhyming dictionary kill itself?).

Anyway, after weeks of speculation, posturing, and trickeration, the Fed finally emerged from their coven and declared an $850B -$900B round of quantitative easing in their attempt to make sure the dollar is not worth the rag paper on which it is printed (or to stimulate the economy and create jobs, potato-puhtaato).  The announced QE2 will involve purchasing $600B of longer-term Treasury Securities over an eight month period (and with their period lasting 8 months, Money McBags can understand why they have been so testy).  In addition to the long-term Treasury purchases, the Fed will reinvest $250B to $300B of the principal payments they receive from agency debt, agency mortgage-backed securities, and their funding of the movie Avatar, into longer-term Treasury securities.

One interesting part of this principal reinvestment is that it involves doing away with the current System Open Market Account limit (also known as SOMA or “SOMAny ways we are fucked”).  Now look, knowing what that means is way above Money McBags’ pay grade (and not just because his pay is $0, well actually, exactly because his pay is $0, but whatever), so he’s not entirely sure if it is important, but Money McBags finds that when rules are suspended (like um, requiring signatures on mortgages, verifying income on loans, or feeding Robert Reich after midnight), that usually leads to things getting more fucked than Sabrina Deep at a fanbang.  Why have a limit on this SOMA thing at all if it is just going to be surpassed when it is convenient?  Makes no sense.  It may be irrelevant, but shit like that just rubs Money McBags the wrong way, like Carl Paladino or gingibitis.

Surprisingly the market was relatively muted after the announcement despite the Fed shitting all over the economy like a diarrhetic with a dilated colon after a late night Jack Daniels and Taco Bell binge.  For those of you not paying attention, toggle away from Spankwire.com for just one second and think about it.  The Fed is buying long-term Treasuries because the economy is still not recovering even though we are 16 months away from the recession having ended (according to NBER and some guy named Del Usional) and this is the same strategy that didn’t spur real growth the last time it was done.  So color Money McBags confused as to the non-chalant to positive reaction of the market, especially if that color is a nice shade of blue to match his eyes and Nell McAndrew is doing the coloring.

To reinforce that, below is what the Fed actually said about the economy:

1.  The pace of recovery in output and employment continues to be slow.

2.  Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and credit tighter than Burt Reynold’s face.

3.  Business spending on equipment and software is rising, though less rapidly than earlier in the year and even less rapidly than Bobby Jindal’s political career.

4.  Investment in nonresidential structures continues to be weak.  It is even weaker than the exchange of heavy W and Z bosons in the standard model of particle physics, and let Money McBags assure you, that is fucking weak.

5.  Employers remain reluctant to add to payrolls, because if you haven’t noticed, their top lines are struggling worse than Money McBags is to come up with funny shit to say every day about things like consumer sentiment, the ADP jobs report, and Cloris Leahcman’s uterus.

6.  Housing starts continue to be depressed, though they’ve worked through denial, anger, and bargaining, so acceptance can’t be too far away.

7.  Longer-term inflation expectations have remained stable, but measures of underlying inflation have trended lower in recent quarters.  It’s not quite as fun of a trend as rainbow parties, but it is a trend nonetheless.

But never fear, because QE2 is now here and given the success of this strategy in the past and how it has led us to being at a cyclical low for this late after the recession ended, Money McBags can’t see what could possibly go wrong (except for the dollar collapsing, unemployment picking up, and growth of WhofuckedthisupVilles).

In other macro news today (and yes, there was some). the service sector expanded faster than guessed as a result of that one extra guy getting temporarily hired to clean a hotel pool.  The service sector, which roughly covers 90% of the economy, rose to 54.3 from 53.2 in September and we all know anything over 50 signals growth as the service sector loves cougars.

ADP said 43k jobs were created last month and in a reverse “hold the shock and hope for no awe” strategy they revised last month’s estimate of a loss of 39k jobs to a loss of only 2k jobs.  Wow, that is a bigger revision than a Texas high school history book’s evolution section and should give analysts as much faith in ADP’s numbers as Money McBags has in analyst numbers.  One other positive sign is that announced job cuts are up only 2% from last month and down 32% since last year which is known as the denominator effect or law of diminishing fucking numbers.

In the market, GM and F sales beat guesses with GM up 3% and F up 15% so it’s a good thing the Fed will be pushing rates down even more to help out the strongest car sales in a year (and yes that was sarcasm).  The rise in car sales was the fastest since “Cash for Clunkers” and its sister program “Please buy a fucking car so our family can eat” were disbanded.  In other stocks, HIG swung to a profit due to strength in their P&C business, wealth management, and insuring many more johnson rods or whatever it is they want to put on their balance sheet.  Explaining to your screaming 3 year old why he can’t have a Happy Meal in SF is easier than valuing an insurance company so Money McBags really could care less about the results.

Finally, GRMN lost its way and missed all kinds of analyst guesses in the Q as they lowered guidance and announced they were killing their smart phone venture as apparently people don’t need to pay for a GPS while they’re downloading porn on their iPhones in the middle of meetings. .

In small cap stocks, Money McBags really wanted to get to NTRI today but he was busy with other shit he had to do for most of the day so has to push that off until tomorrow.  That said, he would like to highlight OPEN again because that thing is on a monstrous momentum run as if it were still 1998 as their valuation is more mind numbing (and expensive) than Lucy Pinder with their current valuation somewhere between 100x and 1 shitillion x next year’s earnings (and for those new to the short scale number system, “shitillion” is between nonillion and “huge shitillion”).  OPEN seems to be such an obvious short that even Value Investor Congress poster boy Whitney Tilson says it should drop by ~50% after scanning his tattered version of Securities Analysis to make sure an exponential perpetual growth  rate is not sensible.

The problem with shorting OPEN here is that when these momo plays get going, it’s look the fuck out because they can run for no reason other than people like shit that is going up.  Given that, and also given that Money McBags has yet to do a full analysis of the company even though many times he has mentioned his gut tells him it is a short, Money McBags would stay the fuck away from OPEN right now until it’s upward trajectory turns as once this thing drops, it will drop fast and hard like Carmen Luvana in the back of the Bang Bus.  So keep this on your radar and be ready to jump in when the momo guys gogo.  Alternatively, if you can defend their valuation, Money McBags would love to hear it since he has yet to fully dig in to the company and his gut could be wrong, afterall maybe this is the one company in history that can be valued at a shitillion times earnings for an extended period.


Editors note:  This column was inadvertently posted for ~15 minutes before it was actually finished, so if any of you read something that looked even more disjointed than this finished version, Money McBags apologizes.  It was a long day and sometimes “Preview” and “Publish” look very similar.