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Kent:
Funny you should mention intervention in the currency markets...I ran a
huge cash currency portfolio during the 1980's and early 1990's and one of
the three people on the board of directors I reported to is now the New
York Fed Chairman...who is also a very close personal friend of the [then]
hed of intervention for the Bundesbank. At the firm I traded for, we did a
very large chunk of intervention for the Fed on a regular basis and you are
indeed correct that lots of planning and talk went on to pinpoint when the
'most bang for their bucks' could be had. I have no doubt they continue to
learn from experience....
Tim Morge
At 05:02 PM 1/3/01 -0500, you wrote:
>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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