by Monty Agarwal on October 31, 2010

When Fed President Hoenig declared last week that Bernanke is making “a pact with the devil,” he wasn’t kidding.

Nor was he talking about a little side deal that would someday be forgiven in money heaven.

Rather, he was referring to an unprecedented decision by Bernanke and Company — coming THIS week — that could change the course of history: A new round of Fed money printing with immediate impacts on markets and unforeseeable consequences for the dollar.

Meanwhile, just 48 hours from now, we will also be smack in the middle of another major event — the most important midterm election of our lifetime.

Each of these events represents potentially
revolutionary changes for our country,
our economy and YOUR money.

Each is going happen THIS week!

And each opens the door to unique, unprecedented profit opportunities, which I describe in my last and most important pre-election presentation, now available online.

Look. Five weeks ago, when we first presented the findings of our internal Weiss poll, we already had a pretty good feel for these revolutionary changes on the way.

Then, three weeks ago, when we shared with you the results of our national Weiss-Zogby poll, we had an even clearer vision.

And now, as the hours tick by, and the events are nearly upon us, it’s time to bring you up to date …

Revolutionary Change #1
Shift to Fiscal Conservatism

We’ve known that, regardless of which party gained control of the House or the Senate, there would be a major shift toward fiscal conservatism in Congress, making it almost impossible for Washington to pass major new spending or stimulus legislation.

Our polls showed us that, in a hypothetical three-way race, a maverick, anti-spending outsider would beat both a Republican and Democratic opponents hands down.

Moreover, voters were opposed to bank bailouts by an overwhelming margin of 12 to one.

And now, within about 48 hours, those voters are going to make themselves heard!

Likely impact: As we have stressed repeatedly, this shift to conservatism is fundamentally NEGATIVE for the U.S. economy and the U.S. stock market. Both have relied heavily on government stimulus for support.

But it could be also be temporarily negative for gold, foreign currencies, commodities and other alternative investments that have been so popular lately.

Revolutionary Change #2
MORE Mass Money Printing

This revolution started months ago. And now it’s about to resume!

Indeed, we have strongly suspected all along that the Federal Open Market Committee (FOMC) was getting ready to announce a second major new round of mass money printing, or “quantitative easing” (QE2).

The problem:

Yes, the Fed CAN print the money and inject it into the system. But it CANNOT control where that money goes. So if lenders and investors have concerns about the U.S. or see more promising opportunities elsewhere, most of that money is diverted to other, alternative markets.

This is why it’s a pact with the devil. And this is why it’s bound to backfire.

Likely impact: QE2 is fundamentally neutral — or, at best, only mildly and temporarily positive — for the U.S. economy. But it is strongly POSITIVE for a wide range of alternative investments, including precious metals, key foreign currencies and certain commodities.

Key Short-Term Factors That Are Now
More Evident Than Just Days Ago

As we stand at the precipice of the week in which these revolutionary changes are going to strike, several short-term factors have also come into clearer focus:

First, regarding the election, the market is now more vividly aware of the likely shift toward fiscal conservatism that we first alerted you to weeks ago. More national polls have been released. These polls have added more weight and confidence to the results of our own polls. And based on all the new poll data, analysts from all three sides — Democrat, Republican and Tea Party — are now in agreement that …

(a) The House will almost definitely be controlled by Republicans.

(b) The Republican side of the aisle will almost definitely include a strong and vocal Tea Party caucus. And …

(c) Even if Democrats retain a slim majority in the Senate, they will most probably heed the will of the majority of their constituents and oppose major spending or stimulus legislation.

In short, the market now knows what we knew weeks ago!

Second, regarding the Fed decision, the market has also zeroed in more closely on the range of likely possibilities, as follows:

(a) Based on the Fed’s own pronouncements, it’s now widely expected that the FOMC WILL announce QE2 on November 3rd. If there is no QE2 announcement, a lot of people are going to be VERY surprised.

(b) The likely QUANTITY is still being hotly debated, but my surveys and research tell me the market is expecting somewhere between $50 and $100 billion in Fed bond purchases per month.

Likely impact: The low end of the range could be a disappointment; the high end will be greeted as a pleasant surprise.

(c) More important than the quantity, however, could be the specificity of the announcement. In other words, will the FOMC specify ahead of time the total amount of QE2? Or will it be vague and keep the market guessing as to how long the money printing will continue?

Likely impact: A vague announcement will be a disappointment. A more specific pre-announcement will be greeted positively.

That’s the market’s perception of the near-term outlook. Now let me give you mine:

It’s the bulls who have been in the catbird seat in recent weeks. It’s the bulls who’ve been riding this wave and leveraging the expectations for QE2.

So right now, the burden is on THEM to get confirmation regarding their expectations for QE2. To stay on track, the bulls now NEED the Fed to pre-announce a very substantial QE2. If they get what they need, gold, currencies and commodities should be off to the races again. But if the number is on the low end, or if the Fed’s announcement is vague, we could see intermediate corrections in many of these markets.

Bottom line: The