'QE2': How to Invest in Manipulated Markets

Discussion in 'Trading' started by ASusilovic, Oct 8, 2010.

  1. Investment Policy in a Manipulated Market

    Determining an intelligent investment policy in a manipulated market is a challenging, if not impossible task. Nevertheless, let us attempt to construct a policy with consideration of the following points:

    * On a relative basis, U.S. stocks are far more attractive than U.S. bonds. The earnings yield of the S&P 500 (using 10-year trailing data), stands at 4.73%. Comparing this to the 2.40% yield on a 10-year U.S. Treasury note and the 3.71% yield on a 30-year U.S. Treasury bond -- equities possess a comfortable margin of safety in the medium and long term. While stocks may outperform on a nominal basis, this outperformance may not exceed the rate of devaluation in the U.S. dollar (resulting in paper gains, with an actual loss of purchasing power).

    * Fear of an increased money supply has driven gold to record prices (priced in U.S. dollars). Other precious metals, and their respective ETFs, have followed a similar trajectory.

    * The Federal Reserve has not published M3 data since 2006, obfuscating the true picture of U.S. money supply. Similarly, there is little transparency as to the gold supply held by central banks and governments.

    * An increase in M3 (the broadest measure of money supply) will not immediately increase consumer price inflation.

    * Global equity markets remain susceptible to manipulation and volatility, as a result of algorithmic trading.


    Can somebody proceed this "code of practice" to the FED ?
  2. Never one to subscribe to conspiracy theorists it is interesting that Spy hit a low of 666 and today stands at 1,166.6
  3. quit bitching and trade. being right and being successful are two different things.
  4. What´s your performance for today in % terms ?
  5. Ignorance is the cheap whore of insight.
  6. pspr


  7. piezoe


    1. The markets have always been manipulated. That is part of their fundamental nature.

    2. It is probably not valid to compare a ten year yield on the S&P with the current yield on the 10 year treasury.
  8. i don't day-trade - all my systems swing.
  9. In a sustained bull market, ignorance can be bliss. :cool:
  10. Not for the late ones. Only for the early birds:)
    #10     Oct 8, 2010