As an investor or speculator, how might one respond to QE3 taper?
"Any answer for what to do in a taper will assume ceteris paribus because how markets initially react when they suspect a taper may immediately change depending on what data are released after the taper. For instance, I've seen Soros and a few other hedge fund managers hold shorts when expecting a taper because the theory is that the market may fall.  However, suppose the market falls 5%, but then positive employment numbers are released.  What then?  The same holds true for betting against Emerging Markets (EM), something I've seen Jesse Colombo and others suggest; the claim that Emerging Markets are in a bubble thanks to the U.S. Federal Reserve (the more money they release, the more the money goes overseas ...).  Again, this is possibly true, but if good data are released after the taper for these emerging markets, they could see growth and those with the shorts could get killed. TL;DR - when we ask about what happens after the taper, we have to remember we're assuming some things about everything else.   I do think that the ""safest play"" post taper is what Bill Gross mentioned about bonds (basically a bubble), as we should see interest rates rise and the Chinese seem to be reluctant to buy as much of U.S. bonds as they have in the past (though some, like Mish, assert the U.S. would welcome this).  The other play I like is the VIX (if you think the market will fall) or against (if you think the market will rise).  SVXY has been one of the best plays since 2011 (compare it to the SPY for the same time period)." As I tell all my clients... remember WHY you are investing in the first. Make a plan and stick to it. Find a strategy and perfect it.  A profit is not a profit until you take it. the same goes with a loss. You never loose till you sell for less than what you paid.  Stop jumping for one market to the next, find one strategy that works for you. Making money in the stock market is easy when you perfect your trading strategy. As for your questions: Precious metal... Buying or selling look for the trends and time frame for your desired holdings. Foreign investments... They have problem in their economy just as we do, if you know someone that specializes in that... good for you. Bonds and CD are not investments in my opinion... I look at them as parking lots for your cash. At this moment in time with the devaluation of the US dollar and inflation both killing any returns even the best bonds are giving out I see no point in them at this time. There are so many ways to easily and safely make money here in our stock market why look elsewhere.  Find a strategy and perfect it, make a plan and stick to it. As for me I love Dividend Capturing and Dividend Stocks, some of these companies have been paying out dividends for decades. Some have been increasing their payouts to their investors since Kennedy was in office.
well, saying:  &gt;DJIA went from 6,626.94 in March 6, 2009 to 17,100.18 in July 18, 2014. That's nearly a 200% increase in 5 years. The economy, on the other hand, has not reflected this rise.  is disingenuous at best since you're measuring the starting point from the depth of recession, when the stock market was severely undervalued.  This is also why many mutual funds boast absolutely ridiculous 5-year yields right now. The Dow hovered around 12,500 for much of 2007~2008, so if you used that as the baseline the index recovered to those levels in the 2nd quarter of 2011. From that point onwards, it's only a 25% increase over 3+ years for an 8% APR, in line with historic values.  I'm not gonna get into whether QE is good fiscal policy or not, all I'm saying is the tapering/ending of QE won't result in a full-on reversal like people seem to be expecting. Hey, you seem like you read a lot about what a quant does on the Internet... I'm guessing zerohedge mostly and maybe some financial pop culture books about the financial crisis. Why don't you leave that out of this discussion as it is pretty misleading. Quants price relative risk and that is important for a number of reasons. I would buy an ETF (or maybe a couple) in stable, blue chip companies with a decent yield (~3%) and then I'd play a conservative covered call strategy on the stock selling a new position about once a month. That's just me. I guess I wasn't clear. I want to modestly leverage (3-4x) my portfolio using options. I believe long deep-in-the-money calls would be the best way to do this? (Let me know if not.)  It's important to me that the covariance matrix from the equity portfolio scales up but doesn't fundamentally change. (I liken it to systemic change as opposed to idiosyncratic change.)   This is what I was thinking:  * For the same expiry date, find each positions lowest lambda. * Match all option to the the highest of the lowest lambda. * Adjust number of contracts to compensate for higher leverage.  I don't think this will work because if I matched the lowest lambda of options on bond etfs to my equity options they would be out-of-the-money.  By the way, thanks for your time. &gt; ES_F June today the most recent 5 min bar has 809 volume. while the september has 10616 volume on the same bar.  on my rolled over contract, the ratio based adjustment has happened last week (9 bus days prior to expiration)  &gt; 1. Commision p/l should be subtracted as actual actual.  absolutely BUT, initially, it is interesting to see if there's a good positive bias in the strategy. then we check whether comm/slippage eats it all. if so we try to play it in an index/etf whatever that charges less c&amp;s/.  agree ? "I think it's apt to remind that there's no shortcuts, if someone thinks about doing FX  fx: - negative sum game (big spread or commissions) - chaos theory description is apt - hard to understand costs (options are insurance and for every trade there is equivalent option position - so unless you understand how those are priced, there's a good chance you're getting a ""sh1tty deal"" as that Goldman guy famously said) - averaging can help if timing is bad but you could be just getting deeper into the ""deal"" I just mentioned and giving a smarter counterparty your money could backfire as it's the ""ammo"" they can use to defend their position.  This doesn't apply to your small hedge/trade? Well that's what I thought not long ago too! That's why I mentioned chaos theory. If you can find a party to hedge with that is not hedging with someone who eventually ends up hedging with JPM/Goldman/name any ""0 losing days a year"" ""bank"".. Then you may have a point. And contrary to what many may still think, all of the above applies to everything you can think of that has to do with money. All the billions with 0-losing days need to come from somewhere and it's definitely not coming just from couple FX punters." I think the point is that m2 is 13.7 trillion usd, the Swiss investment is not even *half* a percent.  The us equities marker valuation is larger at 22.5 trillion USD. Dumping an extra 100 bil usd is too little to do anything. Even dumping a trillion USD  is a relatively small number. You mean in response to OP? Investors should buy physical gold and silver, and wait out the storm. The US Bond market is negative when you factor in inflation, that's a bubble that's going to burst eventually. Riding the gold horse will keep you high and dry.  But if you mean in response to Fearan? I would say that the way to reduce income inequality is to stop all the market distortions and malinvestment due to regulations. The countries with the most income disparity are the ones with the most regulations. &gt;If we are looking to offset risk in location A where we are not able to buy forward with location W, and they are the same commodity is this even a common practice in risk management?  Let me prephase this by saying I don't do work directly in this area, but sometimes I analyze what's happening in less liquid markets compared to more liquid markets in various commodities to get a better sense of the supply and demand dynamics of the market.   It's normal - but just looking at the ratios - it looks like the spread is quite volatile - it looks like the price at location W went from trading at 130% of location A to 170% of the price at location A. (I also don't use R so I don't know which time period was the start and which was the end)  What moved in one direction can definitely reverse. If you don't know what is driving this movement in the spread then adding the hedge could be riskier than not having any hedge on. And there are scenarios where the price of the commodity you want to buy at location A is going to rise towards the price at liquid location W and if you are unable to buy it and store it then there isn't much you can do to hedge your company's exposure. QE is really interesting. I don't think there were ever any negative repercussions. We basically found a way to print money and use it in a way that doesn't cause massive inflation (i.e. Swapping assets out for cash, resulting in zero net value added into the economy). Is it ridiculous to assume we will just do this everytime there's a massive toxic asset bust? My current strategy is long equity in blue chips with limited growth but large profits... Some call that value investing.  GM, AAPL, BRK.B have done very well for me. VZ is a notable straggler. Regardless, my overall positions have grown considerably :)  Not a fan of shorting... but TSLA would be my short of choice since it is very expensive to short SHLD. "The way I am trading this is:  I am long the USD / EUR in cash. I also hold USD / EUR futures, which are traded on the Globex exchange. I am long US equities which have a low exposure to Europe and China (as I expect China to growth significantly slower if the European weakens).  I would not short US equities because Europe-based investors (like me) are buying comparatively ""safe"" US equities to reduce their EUR exposure." so... asset price inflation decoupled from fundamentals (thank you QE) along with rise in ETF (notorious depressant on volatility) means options trader are underestimating volatility? Who calculates the daily spreads between HV and IV, anyone? Im new to this. Well, if you are going long on a future option, you would not have to risk as much capital. I am interested in commodities, but I want to trade it more conservatively. But I do want to learn about them before I dive in, just so there are no surprises. It depends and I would not just jump into conclusion as I have seen cases where offering some services are not U.S. sourced income. I'll advise you speak with a knowledgeable tax professional.