iamned.com

Wallstreet Likes Bailouts and Stimulus

Yesterday the markets sold off over two percent on renewed pessimism, but I didn’t update my blog on this development because Iamned.com isn’t a day-trading blog. Daily fluctuations in the market aren’t important as long as the underlying bullish trend remains intact, which so far it is. As long as the market rises we win. Sure, i would like to see the DJIA end the shortened week above 8200, but if we have to wait till next week for that to happen it’s certainly not the end of the world. My stocks picks like MOS, MA, POT, AAPL and GOOG will keep surging as the market continues to defy and the doom and gloomers and deficit hawks.

That being said, the markets are surging after news of government aid for life insurers. This follows a 1% decline in the futures so the gain is almost 2%. This is irrefutable proof wall street likes bailouts and stimulus and that the anti-bailout, anti tax cut, anti-stimulus populists are wrong.

Had the populists got their way the dow would probably be at 5,000 now instead of 7800 because Citi, Bank of America, and AIG would sized and consumer, investor, and business confidence would have plunged further than it has already.

A recent example is the market’s reaction to the Lehman failure. Had Lehman been saved would the dow have fallen from 11,500 to 8,000 in just a few weeks? All economic indicators dived in the weeks following the Lehman failure. A coincidence? Maybe, but I find it intriguing how those who are short sellers, or have no money in stocks, or on the far left or pro-Ron Paul paleoconservative tend to be those who are opposed to the bailouts, tax cuts, and stimulus. These aren’t groups who are actually invested in stocks and are financial beneficiaries of a failing stock market and economy because they are long the dollar, short oil, and short stocks.

Market historians agree that the great depression was exacerbated because of not only increased regulation but also because the government failed to protect the banks and shore up liquidity. That’s why we need to bailout the too big to fail because the consequences of NOT bailing them out exceeds the cost of the bailout itself. Some companies are too big too fail. It’s a matter of risk reward analysis.

The market likes bailouts. That’s one reason why it keeps surging and why you don’t fight the fed and keep buying all the dips.

2 Responses to “Wallstreet Likes Bailouts and Stimulus”

Comment from jeff
Time April 12, 2009 at 1:01 pm

obama was good in economy stockmarket.

Comment from Paul
Time April 26, 2009 at 1:28 am

No one said that Wall Street doesn’t like bailouts. The problem is that those that took the risk and profited in the past for it, aren’t shouldering the cost: the taxpayer is. I think you need to do some research on the phrase “moral hazard.”

The reason not to bailout the banks is similar to why we don’t negotiate with terrorist: it may solve the short term problem, but it just encourages the behavior in the future.