Will The Fed Cite the Solar Flare in Its Next Beige Book?

On Tuesday, an unusually large solar flare exploded from the surface of the sun. That explosion put a tremendous amount of solar material into space, material which is on a collision course with the Earth. According to National Geographic, that material could disrupt power grids and damage satellites. On Wednesday, the Federal Reserve released its Beige Book. In the Beige Book, the Fed blamed the slowing pace of economic recovery on the natural disasters in Japan and the extreme weather patterns in the United States. So, if economic growth remains stagnant, will the Fed cite this solar flare in its next report? Or, will the Fed be willing to accept blame for the fact that, despite two rounds of quantitative easing and a nearly trillion dollars of fiscal stimulus, the job market remains terrible and the broader economy is faltering? Action Items Bullish: Traders who believe that the Fed is correct in its blame game, and is following an intelligent policy which will lead to economic growth, might want to consider the following trades:

• PowerShares DB US Dollar Bullish Index UUP is a long play on the dollar. The dollar may appreciate if the U.S. economy strengthens.
• ProShares Ultra Dow30 DDM is a long Dow Jones play. The DOW may rally if the U.S. economy improves.

Bearish: Traders who believe that the Fed is following a misguided policy may consider taking positions in the following:

• PowerShares DB US Dollar Bearish Index UDN is a short play on the U.S. dollar. The dollar may depreciate if the U.S. economy continues to falter.
• SPDR Gold Trust GLD is a long play on gold. Gold may rally if investors move their savings from dollars to gold.

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