Thursday, August 25, 2011

Approaching Bernanke’s Jackson Hole Speech – 2011 Version

For the past couple of weeks I’ve been engaged in short-term momentum/volatility equity trading (including leveraged ETFs) on a limited basis.  This has worked very well as I’ve bought when I thought the market has over-reacted on the downside and sold when the market has recouped the over-reaction on the upside.

However, as we approach Fed Chairman Ben Bernanke’s speech tomorrow in Jackson Hole, I’m preparing to liquidate at the open of the market today my current equity positions.  I’m concerned that the equity markets are expecting BB to say something to further buoy stock prices --- and I’m not sure what he can say to meet those expectations.

It seems to me there is more downside risk than upside potential attaching to the BB speech.  There are many who believe the Fed has exhausted the tools in its toolbox and won’t be able to do much more to promote more employment in the economy.  It appears fiscal policy will be the best way to create jobs --- and we all know how dysfunctional Congress is at the moment for this to be a realistic short-term result.  (For an example of this monetary- vs. fiscal-policy discussion, see

If this is a correct assessment, the markets could again fall to their lows of the past month --- and if not correct, what’s the loss of a few upside points by comparison?

Getting ready to fasten my seatbelt for the bumpy ride ahead.