- Verbal intervention is not a viable long-term strategy.
- Unless other major central banks join in, it fruitless.
- Intervention only provides better levels for hedge funds to enter the trade.
For those of you that only know verbal intervention as HID (your significant other) yelling at you to do something, in financial markets it is the action of a very influential person (central bank person or Ministry of Finance person such as Taro Aso in Japan) telling anyone that will listen that they are not pleased that the market (traders, money managers…that’s right…smart people) has not priced an asset to their thinking/liking. So, just like listening to HID when they are yelling, you jump and take notice to legitimize HID, only to resume what you were doing after they depart. Financial markets are no different.