Chapter 8. Making Money with Bernanke
My 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 Committee (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.