One of the key elements in trading is to ask the right question, almost in a Columbo like fashion. Holding the issue of macroeconomic policy theory in abeyance let me outline just a few questions on my mind.

The Greek election is September 20 and the polls are showing Syriza and New Democracy tied at around 27%. The winner of the election will likely be forced to form a coalition with at least two other parties. Stronger Greek governments in the past were not able to meet the conditions of similar creditor bailout programs. Is it right to question a new and weaker Greek government's ability to meet the conditions of the third bailout? What are the implications for Europe and the respective financial markets?

China's share of world GDP(USD terms) has gone from 2% in 1995 to 12% in 2013 and is now the world's second largest economy. Chinese growth is now slowing sharply by any measure and the credit bubble is deflating. By comparison, Chinese credit growth between 2006 and 2014 is estimated to have been 90% of GDP while Japan's preceding the 1990's bust was 45% of GDP and in the US it was 40% of GDP during the credit boom preceding the 2008-09 housing bust. Is it right to consider that the inevitable prolonged slowdown in China will continue to influence global financial markets, support further US dollar strength, and continue to negatively influence emerging markets?

The FOMC on September 17 will announce any changes to monetary policy. Markets currently show the probability of a 25 basis point hike at just under 30%. The reasons for the Fed to hold off from tightening monetary policy might include: fragility in global financial markets, the strength in US dollar, the weakness in oil prices, credit conditions, inflation and inflation expectations well below target, weakness in diffusion indices, labor market conditions, etc. While one tightening may not influence the economy in the medium to long term it may influence financial market in the short term which have a feedback loop to the real economy. Is it right to consider there may be other reasons for the FOMC to raise rates a token amount? Perhaps this is a coming of age moment for the FOMC where they have waited a long time to raise rates and now finally will take the step, even if by a token amount? Perhaps the FOMC wants to nudge rates off the floor and test out the new money market operations? Perhaps certain FOMC policy makers have been concerned about the influence of QE on financial markets and excessive speculation and risk build up? Does a small tightening allow some room to test the impact on markets? The real question going forward though medium term is if the FOMC is going to parallel to Benjie in the movie Summer of '42. Is a consummation of tightening by the FOMC looked back upon as a onetime event as the tracks of the economy in the sand remain of subpar growth and low inflation?


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