Stocks rallied on Friday with the DOW crossing 11,000 implies the investor's buying frenzy. Nevertheless, this incident is considered logically unusual as for the unemployment rate remains high (9.6%). The explanation for this surge can only be that investors are betting on the Fed to move in and further assist the market by pumping in more liquidity. Does this sound familiar?
How is this compared to the Japanese financial crisis? I believed that there is definitely the moral hazard issue involved, since investors are entering in the risky investment because it knows that the Fed will help the economy in the end anyway.
1 comment:
It will be an interesting month, October historically has been a terrible month. Analysts predict weak earning reports this month. I think that we will not continue to trade above 11,000 for the rest of the month. I defiantly agree that moral hazard is high as people have a more positive outlook on the markets. It is especially important to note the weakening dollar.
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