The G7's stepping up, the ECB will (ultimately) fire up the presses, the IMF stands ready to backstop ailing Europeans, China just cut interest rates this morning, and there's this overwhelming sense that the Fed is poised to weigh in big time with more (of the same) quantitative easing, operation twist or whatever "it" takes: That's why the Dow's up 400 points since yesterday's open, right? Wrong! Stocks are up because they're a bargain. Because share prices are depressed while companies are executing like never before.
Or let's say; stocks aren't up because of the decisions of global policymakers, they're down because of the decisions of global policymakers.
Here's the thing: when the ECB, the IMF, the Germans, the Chinese, the Americans, etc., pony up a few trillion collectively, the market rallies on the notion that the doctors, with their PhD's, their lack of real world experience, and their unrelenting desire to keep their jobs, will keep the patient alive.
But hey, who's to argue with a 3.5% two-day rally? Not me. Like I keep saying, stocks (historically speaking) are so compelling right here. The grander question is: will profligate policymakers (the reason stocks are cheap), while their bills are being paid for them, enact any structural reforms whatsoever? Or are the money-printers acting too soon? Were the spendthrifts on the precipice, were they staring into the abyss, or was this just a game of virtual reality? I suspect the latter :(. Moral hazard is, without question, THE long-term risk.
But, like I keep saying, the patient has one strong immune system (entrepreneurial spirit), it's just a little over-anesthetized at the moment...
Stay tuned...
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