What Ben Bernanke Said 03-18-08 mpg Stocks surge after broker earnings, Fed rate cut A quote...."Last update: 4:39 p.m. EDT March 18, 2008 -- NEW YORK (MarketWatch) -- U.S. stocks on Tuesday blasted skyward, with the Dow rocketing to its fourth-largest point gain ever after earnings from Goldman Sachs Group and Lehman Brothers Holdings Inc. proved better than expected and a rate cut [.75%] by the Federal Reserve." -- DOW up 420 - NASDAQ up 91 - S&P up 54 So much for the market not being happy if it didn't get its one percent rate cut (see yesterday's prognostications). The market now appears to be making a technical "W" formation, which usually indicates a bottom with a strong rally thereafter. This may or may not happen of course. Also despite some of this rally's breadth being attributed to some positive earnings from Lehman Brothers and Goldman Sachs, the more pertinent question is what are these firms exposure to all that questionable debt out there. Nevertheless it was an impressive rally and as such the stock market seems to be saying something much more fundamental than what's been printed in the newspapers so far. If you've been reading this blog, especially all the postings regarding financial matters, you would have been under the impression that this editor believes "debt does matter" that you can't inflate or print your way out of a recession, that saving is good and spending more than what you earn is bad, that basing an entire economy's performance on speculation is not a great idea....and all sorts of other shibboleths that the market loudly proclaimed today were totally dead wrong or utterly irrelevant What the Market and Ben Bernanke have essentially said by their collective actions these past two weeks is the following: That Ben Bernanke has given his personal guarantee that speculation in any financial field regarding the creation of any financial instrument will be backed by the full faith and credit of the United States of America. That Ben Bernanke will not allow ANY major Wall Street firm, bank or brokerage house, no matter how egregious its behavior and no matter how much it will cost the taxpayers, to fail. That Ben Bernanke guarantees the stock market will go up, always, each and every year, no matter what. That Ben Bernanke guarantees debt really doesn't matter, nor does inflation or dollar depreciation. That Ben Bernanke guarantees each and every person in this country who tries to save their money, be it by buying a CD, putting it into a savings account, a money market fund, or a US treasury...that you will lose your capital through inflation and dollar depreciation. Always.....absolutely guaranteed. He will personally make sure that it happens. That Ben Bernanke personally guarantees asset inflation of commercial properties and stocks no matter what happens to the economy. That Ben Bernanke personally guarantees your wealth if you're a financial speculator - or - you're poverty if you're not (assuming (a) you save anything at all in US dollars and (b) you don't put it into the stock market.) Essentially the Market said today that it is perfectly OK to go out RIGHT NOW and get a fourth or fifth mortgage on your rapidly depreciating house, even if the bank charges you 15% interest and stick it into the stock market - or if you're still a "saver", to quickly run out to your bank or brokerage firm, sell those bonds or CDs and stick them into the stock market. An important note: None of this means the economy isn’t going to tank, that the federal, trade or consumer debt isn’t going to balloon, or that millions of people won't be out of work or lose their homes. All it means is that it simply doesn’t matter! Ben Bernanke has openly declared to the entire world that the term "moral hazard", does not, and will not, ever apply to the financial sector of the United States economy. REMEMBER !! Through their actions this is what Ben Bernanke and the stock market have stated these past two weeks and if you BELIEVE them, all of you, each and every one of you, should beg, borrow and steal every penny you have and put it into the market. THEY SAID IT !! Not this editor....remember that. - mpg |