Hope is not a strategy!
by Peter Switzer
Wall Street racked up a second positive day in a row as traders have high hopes that the Fed boss, Ben Bernanke, is going to talk about QE3 — more money supply increases — as the US economy slows and the global economy looks to be hurt by the problems in Europe.
And the rise came despite another, not too surprising, unhelpful set of remarks by the ECB President Mario Draghi's.
The Dow was up a whopping 287 points points or 2.37% to 12415. There is a feeling that the sell-offs of the past few weeks were overdone but if the Greeks vote for a euro exit and the EU officials keep imitating nincompoops then we will see lower share prices, especially with doubts about the Spanish banking system.
The ECB did not change interest rates and while expected, it doesn’t make it right! I suppose they are keeping the 1% it has up its sleeve to see what happens in Greece and Spain.
Draghi seemed to be preoccupied with inflation in his comments which is hardly a concern for anyone except bankers and Germans.
The market was helped by the Fed President in Atlanta, Dennis Lockhart, who suggested more monetary easing was a possibility.
This was a good day and it underlines that there is more faith in the market that the worst case scenarios can be avoided over the next few months. This is nothing more than a gamble and a matter of hope, however, as I have argued before — hope is not a strategy!
This market went up on hope, especially for QE3, but the next few weeks and months will be determined by what Europe decides and that’s a worry for me.
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Published on: Thursday, June 07, 2012blog comments powered by Disqus