Today's market activity was about two things: gold and the Fed.
Fed Chairman Ben Bernanke gave his testimony on monetary policy to Congress (the House Financial Services Committee) spooking several markets at the same time.
The prices of Treasury bonds plunged as Bernanke took to the microphone.
And shortly afterwards, the price of gold started to plummet.
Stocks were not exempt, with the Dow stock index also closing in negative territory.
While Bernanke described the inflation outlook as "subdued" he nevertheless subtly talked down the need for quantitative easing (for right now at least).
As always, the markets reacted in knee-jerk fashion.
It was not so much what Bernanke said as it was how players are positioned heading into month-end.
February 29, a leap day, also happens to be month-end and there was a fair amount of month-end related profit-taking.
The reality is that Bernanke's economic philosophy revolves around the need for quantitative easing.
Bernanke believes that hawkish monetary policy (rising interest rates) deepened the Great Depression of the 1930's.
The experience of the past decade arguably proves this thesis to be flawed (if not outright incorrect).
Monetary policy was extremely lax starting with Alan Greenspan at the start of this century with interest rates at historically low levels yet unemployment and sluggish economic growth persist to this day.
Europe's LTRO (long term refinancing operation) kicked off today; the Europeans also subscribe to Bernanke's view of monetary policy.
The European Central Bank was also in the market this morning buying Portuguese sovereign bonds.
Bernanke stands ready, finger on the trigger, to print more money if and when he can justify it (i.e. any deterioration in the European picture or an exogenous geopolitical shock).
If there is a new quantitative easing program, this player would assume that it would be timed so that its effects are felt in time for the November Presidential elections (there is a lag effect).
GDP numbers came out better than expected in a further sign that the U.S. economy is slowly beginning to near a bottom and the Fed's beige book was marginally constructive on the economy.
As for gold, the 5% drop is not at all surprising (or the 7% drop in silver).
At several non-finance related events this player is consistently peppered by the same questions whenever he mentions that he works on Wall Street: Should I be buying gold? Will the price of gold go to $2,000 an ounce? Is gold the new way to get rich?
The notable thing is that many of these folks do not work on Wall Street.
When your barber starts to talk to you about gold, you know that there is a bubble building.
While gold is a shiny and pretty metal, the market for gold is simply not as liquid as the market for U.S. Treasury bonds.
So one big seller (or someone with a grudge against hedge fund manager John Paulson who publicly announced that he is long gold), can really move the market.
And as more people pile on to the selling action, there is a stampede during the rush for the exits.
And the little guys tend to get run over.
The U.S. dollar gained against the Euro to close at 1.33.
The U.S. dollar remains the world's reserve currency of choice and will likely continue to strengthen as the picture across the rest of the world deteriorates (slowing China, Europe, Syria etc.).
Brazil is beginning to consider measures to stem the rally in the Brazilian Real which is hurting the competitiveness of the Latin giant's exports.
In a move worthy of an earthquake for the Fourth Estate James Murdoch stepped down from his role at Rupert Murdoch's News Corporation.
Is Wendy Deng in line as the new heir apparent?
The broad disconnect between the stock and the rates market continues.
As the soothsayer warned in Shakespeare's Julius Caesar, beware the Ides of March.