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I need to understand something, and I admit to being a newb when it comes to this stuff, so please don't stomp me too hard.
If I, as a debt market trader, know that the government (in this case the EMU - but not limited to the EMU) will step in and bail out each country that fails along the way, what is to stop me from driving up spreads/rates to the highest possible to get the most maximized return possible? Who cares that it hurts the country (or company, or whatever)? I know I'm getting my money because of the moral hazard, right?
It depends on the moral compass of the general population of that country. The free loaders, gimme everything socialists will wreck the country as always. The more traditional hard workers will try to avoid it.
You call yourself a newb? I think you understand it pretty well. Benron has given us extreme moral hazard and the only thing keeping these rates down is the thought that the host must live so that the parasite can continue to leach.
By the time the Greek situation is finally figured out, there will be a Port. situation to deal with and then a Spanish situation heating up and then....
The worse the PIIGS situation.....
The faster consumer stocks go up.
WHR gapping up another $10 pre-market, Dollar Thrifty up another $2, both have had monstrous runs already and are entering the terminal blowoff phase...
We should replace the term "bull" with "PIIG"
Used in a sentence:
We are in a cyclical PIIG market.
Someone, I forget who, mentioned in a ZH post that the market goes up whenever there is good news from either Caterpillar or Home Depot. Well today it was Caterpillar's turn, and once again it worked.
Any question of 'contagion' is already a foregone conclusion. The 'contagion' has already existed for some time; we are just seeing its visible manifestation.
This news should be good for another +1000 on the Dow.
Portugal, Spain, Italy, Ireland, France, etc. it will then spread to the States California, Illinois, New York, New Jersey, etc.
You guys are not expanding the credit system exponentially.
The fun is just beginning, market will move up then the trap door underneath the lemmings feet will open up.
Stocks are going up and people are buying stocks because they are going up. What could possibly go wrong?
It doesn't matter that some stocks have priced priced in the return of the Lord Jesus Christ himself to come back down from heaven and take over as CEO. Follow the tape!
LOL. And this hasn't happened in recent memory, right? How long does it take to learn a lesson.
Stocks assuming the consequences of endless bailouts as the printing presses overheat. Gold too, and oil to some extent.
How about Stocks are going up as they are a safer bet than currencies?
Thats the way i see it
Only if it is not exposed to foreign trade in any way. Otherwise it will have positions in futures and currency swap (options) that *might* be on the wrong side of the trade, depending on which bank advised it...
Maybe someone can explain this reasoning to me.
A stock may represent a company that has real assets (property, raw materials, unsold product) that is unencumbered by debt -- an investor could get, in his own name, an actual stock certificate from such a real company, and if the government doesn't decide to nationalize it in order to hand it over to the unionized workers that it employs, then it might have some long-term value, if it manages not to go bankcrupt during the global downturn.
Failing any one of these criteria, an "investment" made in equities is just another form of gambling, not too much different than shooting craps.
The "unencumbered by debt" part is the real kicker there.
The way i see it (bear *no pun intended* in mind I have been a perma bear till now) but If countries go tits up
the world doesn't end, people still need to eat
and clothe themselves but if you are in currencies Ie debt
of the country this will be the thing to suffer with a devaluation so stocks going up
may not be the dumb thing many deflationists think it will be.
We have had the scare4 into the "safe haven " of currencies
now that risk has been taken on by the countries themselves in the bailout so now people see currencies as more ofa risk.
I think holding an poil company or a stock in tescos etc
is safer than cash IMHO
Now if countires hadn't stepped in with the bailouts and stimulus packages then Cash would be the place to be
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