"There is a whole lot to be learned about momentum investing / trading in this letter from Tudor. I have always believed that many people have a good handle on the Macro; the talent is how do you express it in the Micro? Especially if, like me, you have the constraints of being a long only manager (an occasional exception). The chart of the 2010 Nifty vs. 1999 Nasdaq is not to be missed. This may be just the beginning of the bull move in India, Silver, Agriculture, EM Consumer Stocks and many other areas (interesting that he mentions U.S. 10 year bonds). "

Eoin Treacy's view Thank you for this excellent report by Paul T. Jones for Tudor Investment Corporation which explores the question of what to buy in the event that another round of quantitative easing is pursued by the USA, UK and Japan. Here is a section:

But our job is not to make policy. Our job is to anticipate the outcome of various policy initiatives and to deduce their results in the market. Our current situation is highly reminiscent of 1999, when the fear of Y2K computer meltdown led central banks to deliver global liquidity pulses in an effort to cushion possible negative fallout from the failure of systems and the Internet. Once again, policy leaders symptomatically attacked a structural deficiency. Most of that excess liquidity ended up in a very narrow list of approximately 100 NASDAQ stocks, as $20 billion a month poured into margin accounts to purchase technology stocks. Between October 1999 and March 2000, the NASDAQ nearly doubled.

With the Federal Reserve Board about to embark upon a LSAP program of over $1 trillion dollars, it is certainly important to understand exactly where much of this liquidity will roost. And the similarities between 1999 and today bear heeding. Below is a chart of the NASDAQ in '99 and the India's Nifty Stock Index today. This analog would argue for increasing volatility and substantially higher prices at least in early 2011.

It has long been a point made at Fullermoney that capital will flow to the assets showing the best relative performance or those offering the most attractive yields. While economists may like to postulate that the US economy is a closed system, investors know differently. Pumping vast amounts of liquidity into one economy does not imply that the additional capital will stay within the respective country. It will find a home in the global location deemed most attractive by the investing public.

In assessing which assets are most likely to outperform given the assumption that increased quantitative easing is a given, the author hits on two Fullermoney maxims "leader tend to lead in both directions and leaders lead for a reason." Fullermoney themes such as commodities, Asian and Latin American urbanisation and evolving middle classes, technology and global consumer shares, offer global investors attractive rates of return for comparatively low risk when compared to the risk/reward on offer in investment vehicles focused on the domestic US and European markets.

The inverse correlation between the Dollar and so called 'risk assets' was still in evidence when this report was written. However, the US Dollar's decline has since paused, which has checked the flow of speculative flows into some leading investment vehicles. However, the extend of the Dollar's rally has yet been enough to initiate widespread short covering and Asian and Latin American stock markets as well as precious metals remain firm