This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Watch European Central Bank for Opportunities to Make Money on Policy Moves

NEW YORK (TheStreet) -- Mario Draghi, President of the European Central Bank, has just announced new moves by the ECB to combat the possibility that the eurozone will fall into a deflationary cycle.

He has lowered the interest rate the bank charges for refinancings from 0.25% to 0.15% and has pushed its deposit rate from zero to a negative 0.10%.

These moves were expected by the financial markets and so there should not be too much market fuss over the actions.

But, this does not mean that investors have already taken positions to take advantage of the ECB policy changes.

Some people have already acted in anticipation of this news: see "Hedge Funds Anticipate Euros Will Fall" for an example. This is what can happen when central bankers and policymakers "have" to act to "save the system."

Tim Geithner, former U.S. Secretary of the Treasury, speaks to this in his new book Stress Test. Geithner discusses actions that were taken in 2008 to create a "put" to protect large commercial banks from failing; for more, see pages 311 to 314. But here is the gist.

Geithner writes, "The hedge fund manager David Tepper later told the press that in February 2009.... his Appaloosa Management fund began buying bank stocks, because he read our public statements and thought our strategy sounded sensible."

The result: Tepper, according to Geithner, made "billions of dollars" -- not millions or thousands!

"Of course, our goal wasn't to help Tepper make billions of dollars for himself and his investors. Our goal was to get the economy growing again and that required stabilizing the banks so they could start lending again."

George Soros could likely tell a similar tale about his adventures with the British pound in the 1990s.

The story currently taking place concerns the perceived need of the ECB to take action to keep the eurozone from falling into a deflationary cycle, while at the same time the Federal Reserve System in the U.S. is going though the process of "tapering" its purchases of securities.

That is, the ECB is seen as loosening up on monetary policy, whereas the Federal Reserve System is restraining monetary policy from being as loose as it had been.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,279.74 +13.75 0.08%
S&P 500 2,010.40 -0.96 -0.05%
NASDAQ 4,579.7890 -13.6380 -0.30%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs