POSITION: Long US Dollar (UUP), Short short-term Bonds (SHY)
Here’s The Ber-nank’s key statement:
The Fed “continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period."
Here’s reality in the most important part of the US equity market being infused with unprecedented Big Government Intervention:
- Financials (XLF) – November 1st-5th = UP +7.1%
- Financials (XLF) – November 5th-23rd = DOWN -7.5%
- Financials (XLF) – November 30th-December 14th = UP +8.8
All the while, commodity inflation is putting on massive moves to the upside and there are very few things trading with more volatility than the price of volatility itself.
On the score of “price stability”, Bernanke has effectively become the world’s running joke. He doesn’t get real-time markets or how he affects them. That’s scary.
We’re Fed Fighting (Long UUP, Short SHY) because we think that Big Government Intervention perpetuates market volatility and shortens economic cycles. Why? That’s simple – people don’t trust government’s long-term resolve in the face of short-term politicking.
While the aforementioned language is meant to obfuscate fact from storytelling, we don’t think that either the US Dollar or US Treasury market is suffering any fools right now. They get it. Pull up some 6-week charts.
On “subdued inflation trends”, we’ll refer Bernanke to the inflation that’s on your screen.