Posts Tagged ‘QE2’
How I Navigate Trades In a Tricky Financial Market
Thursday, 23 June 2011
If you are like me, you are nervous about the future of our economy. What happens to the stock market after QE2 ends and we are left with a cheap U.S. dollar, low home prices, and high food and energy costs? Not to mention high unemployment and spotty top-line growth for many American companies?
Some are even calling for a repeat of 2008… scary!
We will come out of this. But the question is not only when, but how volatile will the exit be? How do you trade and invest in such a confusing landscape?
To compound the problem, we live in an age of information overload. All that chatter creates noise and hides the truth behind the action.
How Do You Trade With So Much Uncertainty in the Financial Markets?
In Burton G. Malkiel’s book A Random Walk Down Wall Street, he pointed out three potential flaws in fundamental analysis:
- Information and analysis may be incorrect.
In gathering objective data, we may rely on many different sources to aggregate, sort or help us interpret data. During this process, data points may be bad, misinterpreted or miscategorized. - Analysts’ forward estimates of value may be incorrect.
Analysts must make certain assumptions. Even with quality, organized, objective data, the analyst must make a subjective forecast that is dependent on a multitude of factors, none of which have to come to fruition and even if they do, the market may have already priced in that data. - The financial market doesn’t have to “find” estimated value.
So let’s assume that your thesis and the analyst’s thesis is correct and that all of your assumptions become reality — your stock of choice may still decline in value. Perhaps because the “market” wants Read more
Smart Investing Daily – Are We Living in the Federal Reserve’s Twilight Zone?
Jared Levy, Editor, Smart Investing Daily
Friday, 19 November 2010
On Monday, an old friend sent me a link to a now virally famous cartoon clip via YouTube. The clip is a depiction of the Federal Reserve’s second round of quantitative easing in a simplified, humorous manner and has been viewed over 1.6 million times, not to mention it had a front and center showing on CNBC.
It comically poses questions that pretty much sum up the entire state of our economy right now. Is this some kind of a nightmare? Are we in an episode of The Twilight Zone?
Please watch the clip before you continue.
I couldn’t have said it better myself.
Quantitative easing, in theory, should put money into consumers’ hands to spend and into companies’ hands to hire. The Federal Reserve is worried about deflation.
But is this really the case?
Smart Investing Daily – QE2 & Monopoly
Why Quantitative Easing Is Similar to Monopoly
Tuesday, 02 November 2010
The second iteration of quantitative easing (QE2) is supposed to make “money easier” — make it flow from the banks to consumers to businesses, etc. The first round of quantitative easing pumped billions of U.S. dollars into the system, but not much of it made it into my hands, and I’m guessing yours either…
If you have ever played Monopoly and have been “the bank,” you get to control all the money that is divided out to each player.
Remember that the “extra” money is not part of the money circulating in the game yet.
Did you ever cheat and add a little of that “bank” money to your own reserves? I know some of you may have at least thought about it. I mean, how cool was it to just print or add money as you saw fit, so you could buy more stuff?