Two Schools of Thought on the Fed

If you are a constant follower of CNBC then you may have seen two schools of thought about the Fed develop on our airwaves and pixels.

The Federal Reserve headquarters in Washington, DC.
The Federal Reserve headquarters in Washington, DC.

One we're dubbing the "Tepper School," after a rare interview with an influential hedge fund manager a few weeks ago. His assertion was that the market was going up regardless: Either the economy was going to revive and the up-cycle would begin naturally ... or the economy would get worse and the Fed would step in with more "quantitative easing." Either way the market goes up and stays up.

The other is the "El-Erian School." Pushed mostly by Pimco's Mohamed El-Erian," a frequent guest at CNBC, the thinking is that there are still fundamental problems with the economy and even a rejuvenated move by the Fed won't stop the pain ... and eventually the markets, despite some short term gains, will feel the pain as well. The market goes down and stays down until the fundamentals are fixed.

Frankly, journalists love it when you have two different camps emerge on an issue. It is always easier to tell a tale of conflict. And ultimately you hope to run the "And the Winner is ..." headline.

I doubt we'll get to that point any time soon though. The latest Fed minutes and Ben Bernanke's Friday speech didn't do much to clarify the situation. Most think the Fed will have to go on some sort of buying spree. It's sort of committed. The question is how big?

Guess we'll look for another school to teach us that one.