Market Rally is Really A Trap
Jon Markman at MSN in on the mark again in "Market's Rally Is Really A Trap."
Mr Markman concurs with our opinion that the derivatives losses and subprime contagion are just the first bear market...
the second wil be lower earnings, which most investors have yet to come to grips with and we believe will feed into an economic death spiral.
Said spiral starts with banks keeping bad debts on the books, forcing up reserve requirements, leading to a credit contraction...
"The real danger is that attempts by government and industry rescue squads to interfere with market forces
with well-intentioned triage missions will serve only to stretch out banks' pain -- much as was seen in Japan during its two-decade recession.
(Despite the upbeat news and appearances) a credit contraction is likely to trump all of the positives. So enjoy the rally for a few more weeks,
but be prepared for a new leg down by the time second-quarter redemption requests hit hedge funds and banks announce their next round of write-downs."
Mr Markman concurs with our opinion that the derivatives losses and subprime contagion are just the first bear market...
the second wil be lower earnings, which most investors have yet to come to grips with and we believe will feed into an economic death spiral.
Said spiral starts with banks keeping bad debts on the books, forcing up reserve requirements, leading to a credit contraction...
"The real danger is that attempts by government and industry rescue squads to interfere with market forces
with well-intentioned triage missions will serve only to stretch out banks' pain -- much as was seen in Japan during its two-decade recession.
(Despite the upbeat news and appearances) a credit contraction is likely to trump all of the positives. So enjoy the rally for a few more weeks,
but be prepared for a new leg down by the time second-quarter redemption requests hit hedge funds and banks announce their next round of write-downs."
Comments