Todd Harrison: Argentina Rocks US Stocks

By Todd Harrison  JAN 23, 2014 3:25 PM

Currency markets are roiled as the peso takes a hit.

 


Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.

The "reason for the rhyme" crowd is piling into the Argentine peso as the downside catalyst for today's stock market plunge. Lest you missed it, it is changing hands15% lower (against the US dollar) than it was at this time yesterday.

Why? The Argentine central bank scaled back its intervention earlier today because its international currency reserves had fallen to a seven-year low. Inflation in Argentina is currently running at 28%, year-over-year.

Does -- and will -- this matter to the forward path of financial markets? The bulls, for their part, believe Argentina is akin to Cyprus (and won't have lasting implications for stateside markets). The bears, or what's left of them, are thinking more along the lines of Greece.

We know this: There are only so many release valves in the global market machination, and currencies are one of them. The engine has been operating at full capacity for five years (if not longer), and something -- other than social mood -- was bound to spring a leak. It remains to be seen if this latest dynamic will be contained, or if it will knock over the next domino in our interconnected world.

As recently discussed, there aren't many people positioned for a downside trade, so risk management is essential as we edge ahead. Someone once said, "Good traders know how to make money, and great traders know how to take a loss" and I'm reminded of that as I watch today's action.

There are a lot of moving parts, so let's segue into some Random Thoughts:


R.P.

Twitter: @todd_harrison

No positions in stocks mentioned.

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.

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