Monday, October 1, 2007

Dow Jones Erupts Again

Dow Jones staged a remarkable 200 point rally yesterday with a strong belief that US fed will again cut the interest rates by 50 basis points in October. Dollar also got support from stock rally. Crude oil also cools down a bit but still hovering around US$80/Barrel. US economy is still not out of deep problems and hence dollar investors are rushing to buy into riskier assets of emerging markets like India, Taiwan, Singapore, HongKong, driving valuations of assets(stocks) in these markets to absurd levels. Well so far so good, if US fed listens to market participants and don't follow economics rationale, then we may be heading for another rate cut and further inflated asset prices.