[T]he financial storm that reached gale force some weeks before our last meeting here in Jackson Hole has not yet subsided, and its effects on the broader economy are becoming apparent in the form of softening economic activity and rising unemployment. Add to this mix a jump in inflation … and the result has been one of the most challenging economic and policy environments in memory.
-Fed Chairman Bernanke, Aug 22, 2008
As you may have noticed in past blogs, I am not prone to worry much about external factors as they relate to the market and the economy. Past Fed chairman have typically been very very reserved in their assessment of market and economic conditions, even in the worst of times. However, this particular speech, which can be read here in it’s entirety is by far and away the most frank and non homogenized view I’ve ever heard a Fed chair release.
His outlook for the US economy is bleak, at best, and really doesn’t mince words in his assessment of that very fact.
It is quite popular in blogs circles right now to blast Bernanke for some of the measures he has taken, but I take the opposite view. In my opinion, he inherited the current problems that he has been forced to deal with. He was appointed to usher in a whirlwind. Of course, you have probably heard me say that the Feds powers are, in my opinion, more psychological and demonstrative than substantive…and that any major panic-type movement in the markets will leave the Fed simply standing on the sidelines. There is a limit, at best, to the powers the Fed can use to tweak the economy. I believe that they have little ability to stop a tidal wave of economical phenomena. I would concede, though, that the extended period of low rates under Alan Greenspan certainly set the stage for a portion of the mayhem we are currently forced to deal with
That being said, it seems as if we have entered a scenario not dissimilar than “the perfect storm”, which is to say we have a constellation of dissimilar and destructive elements, mostly of our own making, converging to form in a dynamic economic implosion. I do not believe we would enter some sort of “depression” so to speak, but I would predict a drastic change in the near future in the manner Americans will manage their finances, credit and spending….and those that don’t… will find themselves in an abyss of economic disaster or financial ruination.
All right, that being said, how does that after our futures trading activity? The beautiful answer is “not at all”. As observers of the fractal patterns self evident in every market, we can continue to trade those patterns with the same success we always have. As traders, we only seek movement in the market, up or down, and down do not concern ourselves with overall intermediate or long term trends. We are scalpers, and seek only the crumbs that floor on the proverbial market.
Keep smiling, you livelihood is in fine shape and trade wisely…….The Fractal Trader
