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.
Continue reading Valuing Bonds, Dollar Is Crazy in a World Gone Mad . . .