Monday, August 25, 2008

First Impressions

I usually try to look at the markets when I get back from vacation and put on a trade that looks obvious. What I mean by that is, I look at the market and let a trade jump out at me.

Regular readers know that I am a big believer in yield. after reading up on the markets of the past two weeks I see little chance of the Fed raising rates anytime soon. Inflation is a problem but an unstable economy is a bigger problem so the Fed will keep the liquidity ample and as such rates will stay where they are. Looking for a trade I resort back to my usual suspects. I think a basket of trades, Dollar neutral with positive carry is the way to go. I need a little more time to come up with the correct balance but I think that yield is the way to go. While I was away I had one small trade on, riding the curve in Argentina which paid off nicely. It is a clear example to me that positive carry can make up for alot of mistakes.

This ARTICLE from AOL money and Finance basically spells it out. The Fed is concerned about Inflation but they think it will come off and are more concerned about the effects higher rates will have on the economy. Also I saw on the CNBC news scroll on Friday that the Fed would not be raising rates anytime soon. I am assuming it is the news editors interpretation of Bernanake's speech on Friday. Perception is Reality and Stocks certainly took the speech the same way.

Check back later for the trades I put on.

Good Luck and Good Currency Trading.



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