I recently gave a presentation at the Traders Expo. After my talk, someone came up to me and said: Back in August, you were the only person I know who said there would be no Fed taper in September. How did you know? He said everyone in the financial media said there would be a taper and it negatively affected his trading.
My answer was simple. Bernanke has made it clear that there will be no taper until he sees certain economic conditions, specifically the unemployment rate at 6.5%. Recent unemployment data has been between 7.3% and 7.9%. In other words, the Fed won’t do anything until the data improves. In addition, Bernanke didn’t want to rattle the markets with a potential mess brewing in Congress (fiscal cliff talks, etc).
The reason I bring this story up now is that the Financial media has said 100 times this week that if Friday’s Jobs Report is strong, the Fed will consider tapering soon. Wrong again! Even if the unemployment rate drops to 6.9%, it is still far away from their 6.5% target. In fact, incoming Fed President Janet Yellen has recently expressed her desire for a 6% rate. You know how long THAT will take? The only way there will be a taper soon is if the Fed gives in to political pressure. Many members of Congress (and the public) constantly express their disagreements with the Fed, but so far, the Fed hasn’t wavered from their plan.
There are two points I would like to make. First, we are going to be in this accommodative Fed environment for a LONG TIME. You have 3 choices: bitch about it all day, do nothing, or adapt your trading/investing to the environment. I choose to adapt because that works best for me. The second point is LEARN TO THINK FOR YOURSELF! (I’ve written about this in the past) Don’t be so easily influenced by what you read on Twitter or hear on TV. Learn to develop conviction in your own ideas, have confidence in what you are doing, and let the market prove you right or wrong…not the TV. Good luck trading!
I can be reached at: jfahmy@zorcapital.com.
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