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I certainly understand the anguish of those caught short by today's
announcement and I hope that all who suffered were saved by their risk
management disciplines. However, I prefer to look at the surprise move by
the Fed today in the light of my experience from trading currencies in the
interbank market. In most cases when there was direct intervention, the
timing was done to get the most mileage out of the action. "Piling on" when
the dollar buyers, for instance, decided to take some short term profits and
selling as well [the BOJ for example]. The difference in this case is that
the Fed is not "technically" supposed to be concerned with the levels of the
stock market and this move today has the look of both fiscal change and
market intervention. Perhaps Al is wearing a new hat. If so, keep an eye out
for future moves similar to this one. Good luck friends and mind your risk.
Kent the Shaw
"Trust in the Lord with all your heart and do not lean on
your own understanding. In all your ways acknowledge Him,
and He will make your paths straight."
-Proverbs 3:5-6
----- Original Message -----
From: <DLCRL@aol.com>
To: <scheier@erols.com>
Cc: <omega-list@eskimo.com>
Sent: Wednesday, January 03, 2001 4:48 PM
Subject: Re: the Fed
> I know I will regret wading into this but having actually been decapitated
by
> the october 98 surprise rate cut I have to put my two cents worth in.
> Specifically , back in 98 a mechanical model i had developed shorted the
SPUS
> 30 seconds before the surprise rate cut. Took a 53 handle loss on a system
> which normally risked 4 handles to make 10. Luckily i was trading one
quarter
> size other wise i would have been out of business.
>
> It is not , IMHO, whether you were right or wrong in todays move. Someone
> will always be on the correct and incorrect side of those moves when we
are
> talking futures.
> The problem is that they are surprise announcements. My trading style for
> example does not take a position before news , ie an FOMC meeting. So from
a
> fairness perspective it does seem inappropriate for the Fed to do these
types
> of things.
> However I do not think that has any practical bearing on the situation
other
> than to realize that greenspan is not going to let the market tank and
when
> he intervenes he does so in a way that punishes shorts.
>
> The other practical aspect to todays action speaks to the question of
risk.
> Just because you lucked out and were flat or long just before the surprise
> has no bearing on what the future holds.
>
> Dale
>
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