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Two Ways: Bernake Fed Up With US Budget Deficit


Strengthen your portfolio in good times and bad.

Fed Chairman Ben Bernanke testified on Capitol Hill today urging the government to commit to cutting the budget deficit or risk facing continued economic weakness and financial instability.

According to Bloomberg, Bernanke told lawmakers that the Fed won't keep financing the needs of the US government for the long term and warned that the current $1.85 trillion dollar budget deficit is already affecting yields on long term treasuries. "These increases appear to reflect concerns about large federal deficits," he said, but he did also attribute the gains to increased economic optimism, reverse flight-to-quality and other factors like the hedging of mortgage holdings.

In response to a question, Bernanke said cuts in spending or tax increases were necessary to balance current fiscal conditions, but added, "the Federal Reserve will not monetize the debt."

For more on the tape action, see Toddo's Randoms.

From the Bull Pen: All eyes are on 920 S&P where the index broke out and 900, the 20 day moving average. Maintaining above these levels and breaking new highs would constitute very healthy bullish action. Keep those in mind and also be aware of the potential for extra volatility into Friday's job numbers.

From the Bear Cave: On the flip side, if we should see a rally into the end of the week and fail below the recent high, 950, watch out. Although the ultra ETFs were so 2008, it could be a good opportunity to use the SDS, for a short term trade of course.

Start canceling your plans Thursday night so you can party with Uncle Charlie and the rest of the Minyanville Staff at the Red Lion in NYC! Have a great night!
No positions in stocks mentioned.

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