Could the Federal Reserve be the driving force behind the recent surge in stock market prices?
TrimTabs, a market research firm that services 25% of the top 50 hedge funds in the world, compiled a report on cash inflow into stocks and could only account for about $250 billion of the $600 billion required to boost stocks to their current value. The $250 billion included investments by pension funds, individuals, and foreign investors. Liquidity injection into markets through the purchase of stock is not without precedent. Central banks in Asia and Japan, in the grips of economic turmoil, purchased equities to prop up their markets. The strategy was roundly criticized by Federal Reserve officials here in the US. Among the most vocal critics was Federal Reserve Chairman, Allan Greenspan. The criticism waned when the central banks pulled out of equities and realized substantial gains. Given the dynamics of the current economic crisis and the political mind set in Washington, results might not be the same if a similar strategy is being attempted by the Fed here in the US. In fact, su
