Blind Faith - By Michael Lewitt

The logic of the financial markets can only be understood as anti-logic. The worse the economy does, the higher the stock market moves on hopes that the Federal Reserve will institute another round of stimulus. The S&P 500 is up 10% for the year while the tech-heavy Nasdaq is enjoying a 13.5% rise despite the high-profile collapse of the social media sector. U.S. investors are hoping and praying that Ben Bernanke and his colleagues will come to their rescue with another round of quantitative easing this week. Their European cousins are holding their breath that Mario Draghi will batter the Bundesbank into agreeing to his plans to repurchase Spanish and Italian bonds and embark on further monetization adventures. The Federal Reserve will announce the results of its meeting on Wednesday, August 1 and the ECB will follow on Thursday, August 2, shortly after this is published.4  We would respectfully advise those anticipating any substantial announcements from these meetings to prepare for disappointment. To the extent they have further cards to play, these central banks are facing political and practical obstacles that will render it very difficult for them to deliver anything more than anodyne words and actions as summer moves into the always dangerous August holiday season. IPhones (we used to say Blackberries) should be kept on alert at the beach through Labor Day.