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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: reno4 who wrote (42372)	4/22/2011 3:08:10 AM
From: Spekulatius	Respond to of 78508

Reno4 - I don't know what this graph about "excess reserves" means - I am not even clear about what "Excess reserves" really are. The sharp increases in this "whatever" still seems bothersome - it is just one example of the chiefs at the Federal reserve and treasury yanking on so many levers to do this or that (many of which have never been tried before) that it makes my head spin. I don't even believe that economist are in agreement what this might do in the longer run. The fact is however that the US government runs a huge deficit (~1Trillion annually) and the Federal reserve has been buying longer dated assets Treasuries) at the same clip (1Trillion annually) which in my opinion is similar to financing LT assets with short term liabilities. Any banker will tell you that this might work for a long time until it blows up and most likely spectacular so. I for myself decided after the Y2008 disaster to bring macro in consideration too. I stick with a value theme but decided to avoid equities that are extremely dependent on easy money and in addition decided to keep a much larger portion of funds in cash usually, only to be deployed in a hit and run situations like the Japan Tsunami, Flash crash or individual equity special situations (like bank secondaries etc.). Nowadays, I like to keep 30-40% in cash (to be deployed in special situation), the rest in equities and I try to hedge some market risk with short positions or puts when it seems reasonable. Right now, putting in some hedge in place seems like a very reasonable risk reward. However, this should not prevent anyone to put money into a stock when it looks really compelling, so don't forget to post your value idea here :-).