Information is difference between intelligent investing vs. stubbing your toe in the dark. And information on macro issues is much more abundantly available than on micro issues. Micro bottom-up analysis, while more respectable than macro top-down analysis, is just too hard for many investors. Since a macro issue (QE2) is the predominate market force today, investors should find it relatively easy to "make a buck", for what it's worth, (especially when using a macro ETF such as SPY instead of a micro individual stock). And we'll need those gains just to compensate for the eroding value of any dollars we make.
For now, instead of analyzing all those balance sheets and income statements, this simple formula is all we need:
[More QE2 --> lower US$ --> higher asset prices](where asset prices=stocks as well as gold)
In non-arithmetic terms, as the fed fights <b>deflation</b>, stocks rally as the dollar drops. As they fight inflation, stocks slump as the dollar rallies. Hence, gold now is above 1330 as SPY is above 1160. Are these prices just too high to buy? Probably not, if you go by the above formula, which
states that stocks <b>keep on</b> rallying as long as the dollar keeps falling, even if more and more people join the party late.
But keep in mind that the equities rally will drag if anything happens to increase the dollar's value, such as a drop in foreign currencies, or a reduction in QE2.
Keeping it that simple could make for easy money. Don't fret about the long-term
problems we face such as huge national debt. Just strike while the iron is hot for the next 4-to-8 months.
Disclosure: Long SPY