Friday, June 01, 2012
Dead Cats Don't Bounce
China is the big factor here. India is slumping badly, but China looks to have a very steep incline to fight with no real underlying positive factors. The only thing the authorities can do is cut taxes and give local governments a lot of money to spend, and this is both a costly and risky measure.
(And I don't mean Chevrolet Volts.)
Now, there's (almost) nothing left for the Fed to buy. Equities and European sovereign debt, neither of which I think even they could stand the political heat on.
But the cat is dead, and you can only kick it around so much until the corpse breaks up. There's no self-repair mechanisms at work, and entropy is conquering.
There's no pretending that this cat is alive any more. Bits of pulpy, stinky dead cat are falling from the sky, landing all over and scaring investors.
The bottom certainly has dropped out of oil today. Right now I'm going with the idea that commodities are responding to the shifting political winds--oil down, "monetary" metals bottoming. Smells like...Republicans.
It's not about the guarantee. QE 1, 2, and Twist were all purchases of ostensibly guaranteed debt. It's about giving new money to W.S. so that they can trickle it down to main street <guffaw> or something.
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