Valuing Bonds, Dollar Is Crazy in a World Gone Mad
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Valuing Bonds, Dollar Is Crazy in a World Gone Mad
By Mark Gilbert – Bloomberg.com (5 Nov 09)
“In price is knowledge,” an editor used to scream at me. Whether or not you believed in efficient markets, you could be sure the price of a bond, a currency, or a commodity was trying to tell you something about the outlook for growth, inflation, or monetary policy. All you had to do was listen and translate.
Not anymore. The ad-hoc combination of quantitative easing, government stimulus packages, and zero-interest-rate policies has distorted markets beyond recognition.
In short, it is almost impossible to make a coherent argument for what a 10-year Treasury should yield, what a dollar or euro is worth, or whether to buy or sell copper or gold. Following are examples of markets driven mad by the recent enthusiasm for government intervention.
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