jueves, 15 de septiembre de 2011

jueves, septiembre 15, 2011
  

HOOKED ON EUROPEAN BAILOUTS
September 15, 2011
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And, no, I couldn’t say how manyfixes” we’ve had over the past two years but there have been plenty. Each has proven ephemeral but each new effort has become more assertive. This current plan now comes with wide global support. We have to remember these governments have skin in the game for their own economies. BRIC countries have plenty of “stuff” to export to a healthy euro zone so they’ll be supportive. Bernanke is also determined to be a player rumored to be adding $100 billion in aid to Europeans. Also in support were the ECB, the SNB, the BOJ and the BOE. I guess you could say; “it takes a village”, eh?


They may be just buying time since the European populace is addicted to big government programs and benefits. What will happen if EU countries in trouble don’t play ball? Many will oppose austerity demands with violence if necessary making things impossible for politicians. Expect more troubles down the road. And, speaking of the long-term, there will be a large tab for future generations to pay.


Not to be left out, the U.S. has its own current and down the road fiscal issues to contend with. And, there are many U.S. citizens also addicted to government benefits. As an aside, I was at the gym today and a nice elderly man was engaging me in conversation. He’s retired but was now working for a private non-profit organization. I asked him how it was doing and he responded: “The tea-partiers have taken all our funding!” I didn’t argue the point but wondered to myself why they were getting the funding in the first place.


Meanwhile back at Wall & Broad U.S. stocks rallied once again on the latest Europeanfix”. Stocks clearly didn’t rally on any other news since the large economic data dump Thursday was horrible. Jobless Claims higher at 428K vs 412K consensus and prior claims revised higher...again; CPI plus .4% vs .2% expected; Empire State MFG Survey -8.8 vs -3.6 expected with previous -7.72; and lastly, the all-important Fed Beige Book at -17.5 vs -15 expected and prior at -30.7. With the Beige Book you could claim an improvement but buried in the detailsprices paidrose from 12.8 to 23.2 which is inflationary. Does all this seem bullish to you? Yes, if you revive the previous maxim: “bad news is good” since it means more Fed QE on the way. Eventually the bad news is going to catch-up with all of us.


More fun and games is on the way with quadwitching Friday but I can’t imagine things getting any weirder.


Stocks were higher again for the fourth straight day erasing the previous week’s massive sell-off. The short squeeze we discussed early in the week given high short interest was still operative. Leading the way higher was beaten down financials and banks like Bank of America (BAC). Banks were higher on the reasonable belief that if the Fed is going to bailout banks and countries in Europe certainly they’ll support them. Not doing well in the “risk-off department was the dollar, gold and silver, and most commodities apart from energy were down.


Volume remains elevated and breadth per the WSJ was quite positive and now we are probably short-term overbought.


As this is written there is some rumors and/or announcements that the ECB will put together a TALF-like program to make non-recourse loans to banks in their region. This should prop futures even more. Then of course next week the Fed will come with QE3 making the entire global economy a centrally managed affair featuring little in the way of Moral Hazard concerns. Down the road you and your children will pay. Such is the price of centrally planned economies.


The only thing we don’t know about all this euro zone bailout action is simply this: will authorities follow-through on austerity demands for troubled countries? Or, will they just kick the can down the road on that issue just because it’s too damn hard? This stuff is all election cycle dependent.


Friday is quadwitching and that should provide some interesting action if little else. I noted this evening that former star Research in Motion (RIMM) posted dreadful earnings and the stock has tanked. But, it’s not eligible for any Fed relief I suppose and is a company that evidently will fade away.

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