Tuesday, December 02, 2008

Bernanke Speaks.....Stocks Crash

OK so I was a little to early with my Yield Monkey speech. I walked in to weaker EM currency's and sold dollars right away. I was lucky as Usd/Mxn went from 13.8200 (where I sold) down to 13.5800 (where I took it back), Brazil made a similar move and I also profited small on that. But this was just luck. I was lucky that I took Wednesday and Friday off last week or I would have probably been short from worse levels. But it is better to be lucky then good and this time the Good Guy wins (that is me!).

As for the markets, stocks were having a difficult day and when Big Ben Bernanke began speaking all hell broke loose. He spoke frankly and I think this disturbed the markets abit. He said that there was:

“obviously limited” room to lower interest rates further and may use less conventional policies, such as buying Treasury securities, to revive the economy.

That the U.S. economy will probably “will probably remain weak for a time,” even if the credit crisis eases

“Although further reductions from the current federal funds rate target of 1 percent are certainly feasible, at this point the scope for using conventional interest-rate policies to support the economy is obviously limited,”

I think that everything he is saying makes perfect sense. Maybe the market has been drinking a little to much of the "koolaide" being served by the talking heads on TV. I think the worst of the Credit Crunch is behind us, but that doesn't mean things are going to get better all of a sudden. Clearly the Fed is not going to sit back and watch things get worse. They put out two new programs to try to free up credit last week. Those include a commitment to buy as much as $600 billion of debt issued or backed by government-chartered housing-finance companies and a $200 billion initiative to support consumer and small-business loans. Get used to the volatility, it is not going away in the near future.

I am going to hold off making currency picks today, I do not have anything of substance on so I will wait till I get a more conviction on a move.

Good Luck and Good Currency Trading.

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