John Furlan submits:
One of the next targets for speculators is highlighted on the front page of Bloomberg right now, in an article titled, “
Greece Now, U.K. Next as Scots Ready for Pound Plunge.” Speculators are trying to make sovereign debt the falling domino this time around as part of the ultimate game of financial chicken.
As
Yogi Berra once said: “It’s deja vu all over again.” This reminds me of the speculators who went after the i-banks in 2008, from weakest to strongest, like wolves, starting with Bear, then Lehman, then Merrill, with Morgan (
JPM) and Goldman (
GS) spared by the AIG (
AIG) bailout, TARP, them becoming commercial banks under the Fed, FDIC debt guarantees, FNM/FRE takeovers, Citi (
C) bailout, etc., etc.
What also feels deja vu-like is that the U.S. equity markets seem like they want to keep rallying, despite the underlying increase in risk in the credit markets, just as they did right up until August 2007 when you didn’t have to be smarter than a fifth-grader to finally see what was going on. Yet SPX still did not top until October 2007, even though it was already game, set, match at that time, in terms of the potential for the eventual collapse of the highly overleveraged credit system.
Here’s a comment by the equity strategist at JP Morgan Chase on February 26, that gives an excellent summary of Wall Street’s currently bullish views:
“Equities have been range-bound, reflecting the mixed economic news in the US (most recent are elevated weekly claims and disappointing consumer confidence against better home price data and credit trends), coupled with lingering concerns about sovereign debt as well as potential policy actions in Emerging Markets (EM). The market simply has not yet received “tie-breaking” data that firmly establishes the trajectory of the US economic recovery. Hence, while derisking has likely exhausted itself, we do not sense investors are yet adding risk to their portfolios. However, our thesis remains that as global investors add risk, they are likely to favor US equity markets given lower inflationary pressures (vs. EM) and relative visibility (over Europe).”
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Technorati Tags: Debt Crisis, Financial Ideas, Investing strategy, Retirement
March 1st, 2010 |
