Bailout

We peruse the Wall Street Journal’s stock-market round-up each day not to find out why stocks may have risen or fallen, but to determine what factors are conventionally thought to have caused such price movements to occur.  This is an important concern for forecasters, since, even if one attempts to get a read on the market using purely technical means, it still helps to understand what is on the diseased brains of the coprolagniacs whose job it is to manipulate shares to the certain benefit each day of Goldman Sachs, J.P. Morgan and other officially sanctioned predators of the securities world. The very difficult task of explaining the stock market’s behavior to readers of the Journal falls most often to columnist Peter McKay, and we don’t envy him his job.  Because he works for one the most important and prestigious financial publications in the world, it simply won’t do for him to say, as we might (and often do), that stocks rose or fell the previous day for no good reason at all – or at least, for no reason remotely related to reality. We think celestial factors play a far bigger role in this than mainstream pundits will ever be permitted to acknowledge, and that a gypsy fortune teller is therefore better equipped than the highest-paid analyst on Wall Street to tell us why the broad averages are likely to go either up or down. So why did shares dive in the final hour of yesterday’s session after screwing the pooch for most of the day?  McKay cited two reasons: fears related to Europe’s credit crisis, and to the tighter rules soon to be imposed on Wall Street. With all due respect to McKay, this simply won’t wash.  As we all know, investors fear nothing so much as the

The Dow Industrials tacked on another big gain yesterday, blithely ignoring a global thumbs-down on Euroland’s latest, trillion dollar bailout package. The blue chip average finished up 149 points on the day, even as rumors circulated that Germany was about to ditch the euro and resurrect the D-mark. Whether or not this is true – and we doubt that it is – it’s clear that the Germans are becoming increasingly angry about having to play rich uncle to their n’er-do-well neighbors. Outside of Germany there appears to be a growing consensus that any further attempts to rescue, just for starters, Greece will simply be throwing (relatively) good money after bad.  This thought surfaced with unsurprising vehemence in the Rick’s Picks forum, where hard money rules, but it was surprising to see how quickly it caught on globally. For even as stocks rebounded with psychotic energy following last Thursday’s fleeting dive, the world’s major newspapers were questioning whether the  trillion-dollar credit line extended to the PIIGs would do any good. Pessimists were saying it would place a crushing debt burden on countries still able to pay their bills, and even the optimists were not claiming it would do much for Europe’s sclerotic economic growth. The U.S. stock market seemed inured to such doubts – to doubts about anything, really – in continuing its upward course. As the saying goes, “If you can keep a cool head while all those around you are  panicking, then perhaps you don’t understand the situation.” In fairness to the institutional speculators who have been teasing and manipulating U.S. stocks higher, they are not buying shares after having thought about the real world, but rather, because, at this moment in time, buying U.S. shares is what money managers are obliged to do with Other People’s Money. For

Because we called the latest Eurobailout a PR hoax in our most recent commentary, we’ll give equal time to a quite different point of view posted in the Rick’s Picks forum.  The author is “Cameroni,” a frequent contributor who says the European Union deserves praise for not shunning Greece and the PIIGs, especially since it will require considerable sacrifice on the part of the “haves.” Here’s Cam: “The European Union must be congratulated. They have acted responsibly by choosing union over self interest and Nationalism. Instead of shunning Greece, shutting her out and locking the door behind them they have instead made a tremendous sacrifice and have opted instead to take a share in Greece’s misfortunes despite the obvious risks. And they have put their collective neck on the line for the whole union by establishing what amounts to an insurance program for the rest of the sick patients in the group. The pain will be shared while expectations of future growth have been lowered. “At the same time they have sent a clear message to bond rating agencies. You can be replaced. Nobody needs a Rhodes Scholarship anymore to see the clear connection between the Bond raters and currency speculators. Nor do we need a microscope to see how destabilizing those influences can be nor how quickly the global financial system can be brought to the brink of economic calamity. The events of the last two weeks has made it clear to all just how disruptive those influences can be and what negative implications it has for both political stability and global markets. Their blunder will bring on change. No Child’s Game “This is not a child’s games anymore. Future financial reforms may well include putting limits on the speculation of currencies. We will see what transpires with the

At last, the European Union has decided to do a USA-style bailout – one with a quintessentially American, trillion dollar price tag and a shining vision of success.  “[The agreement] will ensure that any attempt to weaken the stability of the euro will fail,” said European Commission President Jose Manuel Barroso.  Yeah, but for how long?  We wonder if Mr. Barroso noticed that the euro finished on a downswing yesterday (see chart below), even as the ink on this latest deal was drying. Still, we hate to rain on the EU’s parade, and even if the Mother of All Eurobailouts failed to inspire a show of confidence in the euro, it nonetheless did pump up the world’s stock exchanges with  trillions of dollars’ worth of dubious new valuations. European shares registered their biggest single-day gain in a year-and-a-half, and U.S. stocks were not far behind. This bailout is a far cry from the paltry $60 billion credit line provided to Greece just a couple of weeks ago. We’d noted at the time that trying to do these rescue packages on-the-cheap would only invite doubt and derision. Probably the last thing those humorless stiffs in Brussels want is derision, and so no one should have been surprised to see them throw caution to the wind by ponying up a proper sum for a pan-European rescue. Greece will now be less likely to get kicked, punched and insulted when it heads for the discount window, and Spain, Portugal Italy and Ireland won’t have to worry so much that all of the rescue money will gone by the time Greece is done with it. Soup to Nuts It’s hard to say how long the good feelings will last, though, since we know from America’s experience that even a trillion dollars doesn’t go very

Bruised and bloodied bears must have felt a rare sense of exhilaration yesterday as trading on the NYSE drew to a close. That, and a twinge of anxiety about whether U.S. stocks could actually fall for two days running. Some traders evidently decided not to bet on it, and so short-covering drove the best rally of the day in the final half-hour.  After all, who would have had the guts to take a short position overnight in a market that has been on a wilding spree for 14 months?  Some short-covering is bound to occur at the tail end of any day on which the Dow has fallen more than 200 points, as it did yesterday. But the fact there wasn’t more of it, and that the lows penetrated some key supports identified in yesterday’s commentary, suggests there is more selling to come.  Bear in mind that Tuesday is a dangerous time of the week for an all-day selloff to occur, since it leaves three days for the selling to mutate into panic. The ostensible reason for yesterday’s decline, which saw the Dow down nearly 300 points at its lows, was news of fresh trouble in euroland. But decide for yourself whether this is really news:  “Global markets tumbled as investors questioned the viability of plans to bail out Greece and fretted about knock-on effects in other nations.” That’s how the Wall Street Journal saw it, but the story is getting to be so “dog-bites-man” that its impact on the markets is probably overrated at this point. Make no mistake, an historical day of reckoning awaits euroland and its politically fraught currency when Greece’s fatal debt disease is suddenly discovered to infect all of Europe. But for the moment, we can only stifle a yawn when we read on one day about how