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2.  Last week’s market action  Fed decision  Economic data  BHP Billiton’s bid for POT fails  Technicals: where is the market going?  What’s the trade?

3. Post FOMC Meeting Rally Play till 3:15 min Thurs. Nov. 4 2010 | 4:01 PM ET

4.  Many traders and investors are almost dumbfounded by the rally in the last couple months  Everyone thought the market would have sold off after the FOMC meeting  Many don’t believe it, but plan on continuing to ride the wave  Short sellers have felt lots of PAIN  Now might finally be the time to short the market or take profits?

5.  Don’t bet against the Fed, because the Fed will get its way by-any-means-necessary and win

6. The rally since September has been a losing battle for the bears

7. The Fed Decision 4:20 min to 8:30min Wed. Nov. 3 2010 | 1:08 PM ET

8.  Maximum Employment  Price Stability

9.  Continues to anticipate weak economic conditions  Unemployment still very high  Employers remain reluctant to add to payrolls  Measures of underlying inflation are still low  Low rates of resource utilization  Tight credit, lower household wealth  Housing starts continue to be depressed  Investment in non-residential structures continues to be weak  Business spending on equipment & software rising less rapidly than earlier in the year  Progress towards the Fed’s objectives and mandate disappointingly slow

10.  No change in interest rates  Keeping the Fed funds rate that banks borrow at, at 0-0.25% for an extended period of time  Decided to expand it’s holdings of securities  Will purchase a further $600 billion of longer term treasury securities by the end of Q2 2011, at a pace of a$75 billon per month  Reinvest $250-$300 billion over the same period at a pace of $35 billion per month  Total asset purchasing will be $850-$900 billion over 8 months ($110/month)  Decision is with-in the range of market’s expectations  FOMC’s “easy” policy decision was voted 10-1, KC’s Hoenig only dissent

11.  Thomas Hoenig  Kansas City Fed President  Fiscal “Hawk”  Believes the risk of additional securities purchases out-weighs the benefits  Likes a strong US Dollar  Prefers a “tighter” Fed policy

12.  Pros:  Fed’s “easy” policy of more QE and low Fed funds rates weakens the US dollar and helps boost exports, it also raises asset & equity/stock prices  Fed wants asset & equity prices higher to help preserve people’s 401K’s so they feel wealthier and will spend more  When stocks are up, companies feel better about hiring and spending more on investment  Fed’s purchasing of US treasuries also helps lower lending rates that consumers borrow at, which will help the housing market

13.  The Fed’s asset purchasing is basically like printing money, which lowers the US Dollar and raises commodity prices such as oil and cotton  A weaker US Dollar lowers the purchasing power the US consumer has to buy basic goods like food, gas, and clothing  Could hurt consumer spending in the end  Fed’s “easy” policy could create asset bubbles  Fed now will have about $2.5 Trillion dollars on its balance sheet after Q2 2011, might be hard to unwind all of it and possibly cause the market to react negatively  Increases budget deficit

14.  Deflation is the Fed’s greatest concern  Leads to higher unemployment and price instability  When prices keep dropping, people tend to think things will be cheaper tomorrow and won’t spend  The housing market will continue to get weaker under these conditions  The risk of “run-away” deflation or a “deflationary spiral” can occur in a recession when people and businesses are deleveraging and trying to pay off debt and can lead to a depression  Deflation is very hard to fight once it gets out of control  Deflation occurred in the recent financial crisis

15.  The Fed currently has a 2% inflation target  Stable levels of inflation are healthy for the economy, allows price stability  Inflation causes people to think that prices will be higher tomorrow, so they will spend and invest  Fed has more tools to fight high inflation, such as raising the interest rates banks borrow at  Hyperinflation—not good

16. Market Technicals Airtime: Thurs. Nov. 4 2010 | 4:23 PM ET

17.  Market needs to rest before it goes higher, otherwise there’s a risk of a major correction  Market cannot continue rally without the financials participating and coming back to life  Dollar index is basically an inverse relationship or mirror image of the S&P 500

18.  ISM  Payroll number/unemployment rate, etc

19.  Canadian Gov’t blocks BHP Billiton’s $40 billion dollar bid for PotashCorp (POT) on Nov 3rd  Would have been the biggest M&A deal in 2010  BHP has 30 days to put a better deal on the table  Many think the deal is already dead  Canadian Gov’t most likely wants to protect it’s strategic assets, POT is the biggest potash producer in the world  BHP might go for a smaller fertilizer company than POT like Mosaic (MOS) or Agrium (AGU) next