What is the Fed really telling us?
December 10, 2009
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RELATED TICKERS: GOOG
There are a lot of things that we could say about the Federal Reserve's policies over the past couple of years. Much of them are subject to opinion and conjecture as it's tough to really know how things will pan out in future years -- and even then there will be plenty of debate over whether success (or failure) of the Fed's policies led to the good times (or horrible times) in the economy.
But there is one thing we can pretty much say for sure, and that is that by knocking down rates, the Fed is making low risk assets like U.S. Treasuries very unattractive and is pushing investors towards riskier assets. While acronyms like CDO, CDS, and MBS might come to mind when you think risk, that category also includes stocks. So, yes, the Fed is basically telling us to buy stocks.
Today on Fool.com I addressed the fact that even though stocks carrying high valuations today -- such as Google and CME Group -- look attractive compared to the kind of returns you can get on safer assets, that's no excuse to get lazy and let the Fed's policies lead you into unnecessarily risky investments.
Matt
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