c08 JWBT016-Busby September 30, 2008 14:0 Printer: TBD
CHAPTER 8 Making Money with Bernanke
M
y heart is racing and my hands are damp. I have made this trade
dozens of times, but my adrenaline still surges as I wait for the
news. Today, I am in Dallas visiting Penson, a large brokerage firm.
I, like the rest of the world, am waiting for Ben Bernanke to speak. I know
the information he releases will give me an opportunity to make money. I
do not plan to miss my chance—even though I am miles from home and
the comforts and equipment of my office.
As I wait for the news, I look closely at prices and consider potential
buy and sell points. It is Fed Day, and I always trade the regularly scheduled
Fed rate announcement. Eight times a year, the Federal Open Market Com-
mittee (FOMC) meets and discusses the overall health of the U.S. economy.
They look carefully at inflationary gauges and consider price trends in the
context of the increasing or decreasing patterns of industrial and business
operations. One of the most important jobs of the Federal Reserve is to
regulate monetary policy in such a way that full employment is fostered
while simultaneously holding inflation in check. A powerful tool available
to the Fed is the federal funds rate. At each of these scheduled meetings,
the Fed announces its decision about any rate changes. As a rule, when
the news is released, the markets go wild. It is impossible to predict with
any degree of certainty how Wall Street will respond to any particular rate
announcement, but there will be a reaction.
Knowing my habit of trading the Fed, the executives at Penson offer
me a desk and Internet access so that I can ply my trade. Not only am I
making the trade myself, but I am doing so over the DTI chat room; and it
is packed with observers. The area in which I am sitting is also filled with