Wednesday, October 01, 2008

So who needs a Bailout Package?

The market rebounded close to 500 points yesterday and all without a Package. Amazing huh? Well really it is not. There were clear signs throughout the day that new deal will be reach, possible Thursday, but clearly to me one will be passed. President Bush as well as members of Congress (both Republicans and Democrat's) were on the tapes letting it be known that all hope was not lost. Also came a report that members of Congress's phones were ringing all day telling their representative to VOTE FOR THE PACKAGE ! I think this goes back to what I was saying yesterday. The average American doesn't understand exactly what is going on. They hear what is said on TV and except it as true. I believe that most people did not (and most still do not) understand the serious situation the U.S. economy is in. When they hear their congress man say that the package is to rescue the fat cats on Wall Street, to save their seven figure bonus they think it is true. As I said yesterday, without this bailout Main street feels this as much if not more then Wall Street. People felt the pain of the stock market drop on Monday. They also fear what lies ahead if no thing gets done.

As for the markets, the dollar did very well on the back of all this. The Euro and Gbp sold off aggressively as European markets look to be in the beginning stages of fragile markets while the U.S. quite possible is nearing the end. I have cut my Short Euro position and am now square. Emerging markets all performed well. Usd/Mxn and Usd/Brl opened lower and never looked back. Both stock markets performed well. In Chile, the Central Bank came out and announce that they would suspend dollar purchases (they were in the market buying 50 usd per day). This caused the market to open 13 big figures lower (547 against a previous close of 560). As trading went along it moved back to 550-551 and basically closed there.

One last note, in yesterday's WSJ it talked about JPMorgan raising capital to buy WaMu. It also stated how they raised a few billion extra and said,

Many investors, including J. Christopher Flowers and his old shop Goldman Sachs, are gearing up to bid for the masses of distressed bank assets expected to flood the market in coming months. Will JPMorgan be a buyer again?

I think this is a recurring theme "Don't panic"...."Now is the time to buy...not sell". This may or may not be true, but I think the important thing to remember is what I call the sleep factor. If you are worried about your position, be it Stocks, bond or currency, and you cannot sleep you have to much.

You cannot win the fight if you are not able to participate.

Good Luck and Good Currency Trading.

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