Wednesday, June 19, 2013

Fed Said Nothing

Yesterday Fed announced its policy and there has been no change in its stance and its committed to contribute $85B to mortgage markets. Markets sold off. Financial pundits appeared in TV and they gave new theory which is complete non sense and its bullshit.
Everyone on TV said that Fed is going to taper immediately and they are simply going to wind up the support. Bernanke has clearly said that he would wind up the support gradually on the basis of data. He added that if data doesn’t support fed is not going to withdraw its support.
He also added that he would start tapering on slow pace based on data and only after tapering he would look on to withdraw QE and only after that he would think about raising interest rates. Whereas pundits have conveniently forgotten everything and they simply shouted that he has signaled tapering which is complete ignorance or purposely shouting for some unknown interests.
INR has depreciated almost 2% against USD and I believe this is complete panic. This is not 2008 and if something goes wrong Fed would simply pump more money and could continue to support system. Secondly there has been no disorderly default like Lehman Brothers that happened in 2008.
If a trader has been in panic situation he would never see money making opportunities. There has been lot of money making opportunities but that has to be done in intelligent manner by taking small trades and go aggressive on confirmation.
GBP, Euro has been trading at higher levels and if you  watch these counters you would simply identify that the raise of both these currencies happened on not so higher volumes and are completely speculative in nature. This is bound for small correction and one could try in these couple of currencies.
Its always advisable to trade small position in order to keep our emotion intact despite panics that are bound to happen in the markets.

Disclaimer: Do it at your own risk and don't blame me for your losses.

Saturday, June 15, 2013

Rally on cards!

I've been reading negative articles on daily basis. From Oz to US there has been fear mongering and doom happening in MSM and on blogs. Everyone in this world are talking about tapering of fed and they have started speaking the eventual crash that is bound to happen in matter of months and could witness the situation or scenario that would be much worse than 2008. I'm not well versed in Economics ( Not in anything, but that is different) and I don't know much about economies of world. With this kind of negative sentiment there is a possibility of huge rally and its right in the corner. If you have intention to short the market it would be better to wait for couple of days before going to short the market. 

Trends and charts simply looks negative. I don't have any debate on that. But I always think like " There are always trends in the markets and there is Federal Reserve". 

I'd like to present couple of scenarios on the market. If fed tapers we could witness a crash that could make 2008 as a laughable one because there would be huge long unwinding which is much more dangerous than shorts in the markets. After long winding we could witness shorts that could tear the markets. Dow could very much go to the place where it has started at 2009. Few of the pundits ( whom I have great respect and they are highly educated, highly experienced and have lot of sense in their opinion) believe that Dow could correct not more than 20% and I simply differ with them purely on the basis of sentiment. Sentiment is important for the markets and if fed tapers it would simply break the sentiment across the world and there would be nothing but a " Global Sell off". I don't expect anything less than that. We could witness huge problem in mortgages and bond markets that could add further pain and could possibly face liquidity crisis which would contribute to insolvency of the system. I don't have second thought in this issue and this is going to happen only because of sentiment and sentiment is much powerful than common sense. All these things are known to everyone in the world and I'm not writing anything intelligent or unique that is not known to world. Unprecedented crisis is bound to happen if fed tapers their commitments from the markets. 

On other side. Fed have been watching the action in the global markets. All EM currencies have depreciated almost 10% against USD and bond markets have been sold off. Central banks of EMS are simply waiting to see how things pan out and they simply don't know how to respond in the markets. Fed understands that this is not just going to be a carnage in stock markets but its going to carnage in all asset classes across the world. If EM currencies witness huge sell off it would eventually affect the profits of Fortune 500 companies that are having operations across the world and particularly in Emerging Countries. Secondly just put yourself in the shoes of Ben Bernanke. He simply supported the markets and has made things calm in mortgage, debt and capital markets for the past 5 years. Without witnessing comfortable unemployment rate, Inflation and GDP its simply unnecessary to withdraw support from the system and Fed would never do that. They simply don't want to see everything in dust in matter of months. They can't accept things going to dust because they have worked hard for the past 5 years and they simply can't afford to allow to go burst in matter of months or even minutes. Fed simply understand that sentiment itself would simply create a catastrophe and they know that their hard work would be put in vain in minutes. 

It could atleast take a decade for fed to taper the markets. As of now I don't see any evidence or need for the fed to taper the markets.

Important Note: Withdrawing QE and tapering are completely different. Please don't compare tapering with Withdrawal of QE.

Meaning - We could probably witness huge rally of 5%  before getting sold off!

Disclosure: I've taken position and I could probably make profits on rally as well as on sell off. I can't simply afford to sit in my opinion of continuing the support,because I won't get bail out from Fed. I've already taken the position.