Thoughts on the Fed's first press conference

The Federal Reserve made history yesterday by having its first press conference.  Key takeaways include:

• Economy is weaker than planned.  As a result, the Fed has reduced its full-year forecast for economic growth slightly.
• Fed intends to intend QE2, but will maintain the size of the balance sheet.  There is little possibility of QE3.
• The end of the "extended period" is a couple of Fed meetings away
• Ending reinvesting is tightening of monetary policy
• The value of the USD is the problem of the U.S. Treasury, not the Federal Reserve.

My thoughts on the press conference:

• Yes, the USD is more of the problem that should  be dealt by the U.S. Treasury.  But, the issue is that Chairman Bernanke is not taking blame for the policies that he's pursuing is one of the primary causes of the fall in value of the USD
• Chairman Bernanke did not take blame for the rise in commodity prices as calling them "transitory" or temporary.  A few moot points.  First, around 80% of the world's commodities are traded in USD.  Second, when there are negative real interest rates, the inflation trade (i.e. commodities) is going to be on steroids.  Thus, Bernanke (as with the USD) not taking at least partial blame for the rise in commodities was troubling.
• The overall tone of his messages were not hawk-ish, but at least less dove-ish.
• In a previous post, I posted an article that likened Fed policy to house party gone mad.  I still stick with that assessment.  As before, the market was usure whether there would be a QE3, this means the party could go onto in the morning.  Now, at least with implicit no to QE3, the party is going to keep going, but end at 6 am and could end badly.
• I'm bearish on the market following QE2 because of the reaction to the news of the press conference.  During the conference, the USD hit a new three-year low.  In addition, there is extreme complacency in the market when one looks at how gold trades, stocks continuing to go up, and little volatility as measured by the VIX.

How should investors play the market:

A CNBC article highlighting last night's Fast Money show hits the nail on the head, in my opinion.

Trader Brian Kelly also found Ben Bernanke’s comments bullish for stocks. “If there's going to be even a minor uptick in inflation investors will put money to work in assets that will beat inflation and that makes the stock market the place to be. The outcome is a much higher stock market.”