IS THE “CAN’T LOSE MARKET” BACK?

IS THE “CAN’T LOSE MARKET” BACK?

Courtesy of The Pragmatic Capitalist 

So that’s all it takes these days to sweep a good crisis under the rug – cut a nice big check to all the people who made the bad decisions that caused the crisis.  In no time we erase a few weeks worth of stock market losses.  Government has everyone’s back.  No one fails. There are no losers in this market.  No risk.  You truly can’t lose.  You could buy the very worst debt on the planet and governments will make sure you remain whole.  What a deal.   It’s capitalism turned on its head.

Equity investors are clearly catching onto this trend and snatching up stocks with total disregard for any risk.  And why shouldn’t they?  After all, government will bail them out when everything goes haywire.  It’s almost a guarantee these days.

In fact, the sad thing here is that you’re almost better off causing the next big meltdown.  It goes like this – ramp up risk, make huge profits on the way up, record bonuses for everyone and then when it all goes bust you take none of the losses.  Instead, the government takes the loss, you get bailed out and you start the whole game over again!   Sounds fantastic doesn’t it?  That’s what our stock market can be boiled down to these days.  I’ve never seen anything like it.  It’s great for all the gamblers.  And horrible for all the regular joes.

The can’t lose market is back.  Buy something.  Anything!  Who cares.  It’s all on sale even if it’s not.  And when it goes bust you’ll get a brand new model courtesy of Government Inc!

…Followup comment by Pragcap:

The Eurozone bailout was a line that should never have been crossed in my opinion. It’s dramatically different than TARP, but far worse. It’s so misguided I don’t even know where to start.

This has now become a global phenomenon. All three major regions of the global economy have now enacted massive bailouts in the last decade. It’s only exacerbating the problems.

This is a major turning point I believe. People will remember the EU bailout as the day that sparked a huge rally in risk assets that laid the foundation for one of the greatest busts of the all-time. The question now is how far do we boom?

If logic serves one then we could easily be back at 1,220 in less than a week….I’ve never looked at a market which such juxtaposition. We will either rally enormously as investors convince each other that the problems are over, OR we will crash and burn as people realize this bailout does nothing to fix the inherent problem. Recent market action tells me investors are convinced that the problem is solved.