About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Tuesday, August 05, 2008

Monetary Policy / Trades To Watch

Monetary Policy

Fed's FOMC met today and left the FFR% at 2.0% as all expected.
The statement carried no significant surprises, either. Key
economic variables supported a "no change" stance. However,
recent economic indicator readings show renewed economic
weakness in industrial and commercial order rates. If fresh data
on these series to come in early September show further erosion
in order rates as we move into the 2008 election homestretch,
figure FOMC members will receive phone calls from Power
suggesting a further ease might be in order.

Trades To Watch

The price of oil has broken sharply again this week and, at $119 bl.
or so, is right down on trend support for the powerful up-channel
in evidence since early 2007. Nat. gas has already broken down, and
further weakness in oil below $120. would signify a change of
direction not just for trader sentiment but for supply / demand
perceptions as well. Weak oil is helping the stock market and is
providing support for the US dollar, which is on the cusp of an
intermediate term breakout (see chart). The combo of a firmer
dollar and the drop in the oil price is also pressuring the gold price
as well.

The next couple of weeks will be important for traders and maybe
investors, too. Weak oil / stronger dollar is a major change in the
environment, likely reflecting concern that the global economy is
cooling fast and leading players to look over fresh horses. Just
remember that markets like oil, gold and the US$ can be fickle or
volatile or both.

No comments: