Asian markets rise, European markets rise, and US markets rise, and the news tells us Ben Bernanke’s comments are the reason. Well maybe that is technically true, meaning one can track this sort of thing easily – Bernanke speaks the markets rise. Simple enough, right?
This assumes, of course that the market is simple, which it is not. It may be irrational, and it may be fickle, and it may be prone to fear, but one thing is for sure, it is not simple. Global markets rose not because Bernanke suggested more liquidity is available if needed – the markets rose because investors began chasing it and the shorts took cover. Bernanke’s words yesterday did not break new ground. He has said them repeatedly. Every investor and trader on the planet knows his position on this matter. No, what happened yesterday is what will keep happening until some outside force impedes the momentum of the market – the market wants to go up, and as long as the US economic data keeps improving, it will find a reason, despite what the news media and pundits tell us. If Europe kicks in with more improving economic data, the market momentum will increase. Think about this – how does any money manager sit on the sidelines of a market that is showing no signs of retreat?
I mentioned Europe, which is weird because the word is foreign after not being in the headline news for a bit of time. Well, just because the breathless media is not reporting on it ad nauseum, this does not mean what is happening there is not news worthy for those who play the market. In fact, if one is paying attention to Europe, one will see that the ship is slowly righting, just as the US ship has been righting for some time. I know I have been saying this ad nauseum as well, but the financial problems the US banks foisted upon the world, and the ensuing problems Europe has faced with its massive debt, take time and political will to correct. We have had both in spades, and now the listing ship is listing less and the movement is clearly toward level.
Financial firms gave a big boost to the Asia-Pacific index’s advance after German Chancellor Merkel gave her first indication she is prepared to allow an increase in the debt-crisis firewall, saying Germany could let the temporary and permanent rescue funds run in parallel.
Yes, time and political will are what it takes, and part of political will is finding a way to get done what needs to get done in the face of massive political force arrayed against getting it done.
The ECB has lent European banks an unprecedented 1 trillion euros of cheap money over three years but banks have consistently parked roughly three-quarters of the money at the ECB overnight, instead of issuing loans.
Both Germany and the ECB have faced and are still facing massive political force against the idea of printing money to save the financial structure of Europe, and in that process, the economy of the EU and the rest of the world. Yes, it is irrational and self-destructive, but purely ideological positions are sometimes irrational and self-destructive. The payoff is now coming, as banks will begin to lend (as they are in the US) and the not-so-simple market sees this. Investors want to be on the train; they are just not completely sure yet when it will finally leave the station. The departure time is coming, and the not-so-simple market is starting to read the schedule.
Stocks also rose after the Munich-based Ifo Institute said its German business climate index, based on a survey of 7,000 executives, increased to 109.8 from a revised 109.7 in February.
Trade in the day – Invest in your life …
