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« The HUI Fails To Impress | Main | Option Trading Strategies »
Tuesday
Oct042011

A Case of Too Little, Too Late

This is a short excerpt from the WSJ covering the speech made yesterday by Chairman Ben Bernanke:

Federal Reserve Chairman Ben Bernanke warned the U.S. economic recovery was "close to faltering," and said Congress and the White House had a "shared responsibility" with the central bank to respond.

Such dire warnings are a gamble for Fed chiefs—or any leading policy maker for that matter. Mr. Bernanke wants to spur action in Washington, but he doesn't want to undermine fragile household and business confidence with gloomy talk.

Even so, Mr. Bernanke said the tumultuous talks to raise the debt ceiling in August unsettled investors and that the steps Congress has taken so far to reduce the long-run deficit have been inadequate. Even the $1.5 trillion budget-deficit reduction that a congressional super committee is assigned to produce by November won't be enough, he said. "More will be needed to achieve fiscal sustainability."

Speaking Tuesday before Congress's Joint Economic Committee, Mr. Bernanke's called on Congress and the White House for better policies to shrink the federal budget deficit in the long run without cutting too aggressively right away.

Speaking Tuesday before Congress's Joint Economic Committee, Mr. Bernanke's called on Congress and the White House for better policies to shrink the federal budget deficit in the long run without cutting too aggressively right away.

While fiscal policy is critical. Mr. Bernanke said, Congress needed to find new ways to jump-start the housing sector, promote trade and improve an overly complex tax code. "Fostering healthy growth and job creation is a shared responsibility of all economic policy makers, in close cooperation with the private sector," he told the bipartisan congressional panel.

Needed actions include coming up with a long-term plan for Fannie Mae and Freddie Mac, which are now being run by the government, finding ways to make it easier for households to refinance mortgages and making it easier for banks to rent out properties they have come to own on defaulted mortgages.

Mr. Bernanke's remarks suggested the central bank itself wasn't moving quickly toward new measures to jump-start economic growth.

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At the time the DOW was in free fall but managed during in the final hour to pull out of its nose dive and actually finish in positive territory, gaining 153 points during this trading session. Gold and silver prices which were also getting battered improved towards the end of the session, but not enough to to get back into positive space.

Mean while over the pond its Italy who have taken center stage having been down graded by Moody's as this excerpt from the BCC depicts:

The Italian government's credit rating has been slashed by Moody's from Aa2 to A2 with a negative outlook.

The ratings agency blamed a "material increase in long-term funding risks for the euro area", due to lost confidence in eurozone government debts.

Despite Rome's low current borrowing needs, and low private-sector debt levels in Italy, Moody's said market sentiment had turned against the euro.

Prime Minister Silvio Berlusconi said the decision was expected.

"The Italian government is working with the maximum commitment to achieve its budget objectives," said Mr Berlusconi.

He said that a plan to balance the government's budget by 2013 had been approved by the European Commission.

Analysts say the downgrade is likely to be followed by similar cuts in the credit rating of Italy's banks, which would put severe pressure on their ability to borrow. "This downgrade will make it even harder for Italy to borrow," says BBC business editor Robert Peston. "However, that is not the worst of it.

"If Italy is looking like a more risky place to lend, its banks... will find it harder and more expensive to borrow. The [eurozone] banking crisis will be exacerbated."

Moody's also raised warnings about Italy's growth outlook, citing structural economic problems within the euro, as well as a global economic slowdown.

Another problem noted by the rating agency was what it called political and economic "implementation risks".

"The question is, if [eurozone governments] will move fast enough... to really put in place a credible solution," says Robert Peston.

An expansion of the eurozone's bailout fund already approved by the euro's 17 governments in July - which is now seen by markets as inadequate - has still yet to be ratified by all the national parliaments.

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The European crisis looks like a train wreck in slow motion, it takes so long for the gathering of the Clans to get together and implement some form of remedial measures that the problem has grown in magnitude to the point were their actions are a case 'Too Little, Too Late!

Finally, Mining stocks: The HUI was down again today closing at 502, having spent most of the session sub 500. The breakout at the 600 level now looks to have been a head fake. It would still appear that the investment community see these stocks as either stocks in general and therefore can and will be sold as necessary, or should there be a margin call they can be sold because they do have a bid.

For now we will sit tight and watch, keeping our powder dry for that 'opportunity' should it present itself. Also keep one eye on Spain, with unemployment at 20% its not looking too clever them at the moment.

 

Regarding www.skoptionstrading.com. We currently have a number of open trades at the moment however, we do not update the charts until the trade is closed and the cash is back in our account. 

Our model portfolio is up 407.38% since inception

An annualized return of 113.83%%

Average return per trade of 42.43%

86 closed trades, 83 closed at a profit

Average trade open for 45.85 days

So, the question is: Are you going to make the decision to join us today.

Stay on your toes and have a good one.

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