Moneybox: Risk On!

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moneybox Risk On! Do the Fed, computer trading, and a few hedge funds rule the market? That might explain why it's lost its mind. By Bethany McLean Posted Friday, Aug. 12, 2011, at 2:19 PM ET After the madness of last week and the rollercoaster at the beginning of this week, the stock market recovered from its Aug. 10 rout to bounce 423 points on Aug. 11. It was the fourth day in a row in which the index moved by more than 400 points, which has never happened before in history. As I write this, stock prices are leveling off, but the big swings may not be over. Has the market gone mad? Actually, yes. In theory, the stock market is supposed to reflect the prospects for the economy--the earnings potential of the stocks that make up the Dow Jones Industrial Average. But there's more than one reason to believe that what's going on now has little to do with any rational view of the future, and a lot to do with the market itself. "Dip your toes into any risk asset right now and understand that you are not entering into anything remotely resembling a normal market environment," wrote David Rosenberg, the well-respected former Merrill Lynch analyst who is now the chief economist at Canadian firm Gluskin Sheff, in his recent newsletter. "Dysfunctional is more like it." To continue reading, click here. Bethany McLean is a contributing editor at Vanity Fair and the co-author of All the Devils Are Here: The Hidden History of the Financial Crisis. Join the Fray: our reader discussion forum What did you think of this article? POST A MESSAGE | READ MESSAGES Also In Slate Lithwick: The GOP's Scurrilous Attempts To Undermine the National Labor Relations Board The Guy Who Downgraded America's Credit Rating Is an Old Friend of Mine. Here's What He's Like. How Far Do I Have To Ride My Bike To Offset the Energy It Took To Make It?	Advertisement
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