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The Optimistic European Stock Markets

Bloomberg:

European stocks climbed for a fifth straight week, the longest stretch of gains since October 2007, as speculation grew the worst of the credit crisis is over and government measures will succeed in reviving the global economy.

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David on :

And not just in Europe. In the US the S&P 500 index has gained 25% since stocks bottomed out on March 9 - one of the best runs ever.

Pat Patterson on :

The problem is that after the Great Crash of 1929 the market was fairly close to its starting point by the first few months of 1930 then proceeded to lose 83% of its value through 1932. Also that so far the big investors are still sitting on the sidelines or going short so we are not home free by a long while yet. It started with a collapse of the housing market and as yet that has only rebounded in the under $300K, mostly foreclosed and tax forfeited, properties. And unfortunately unlike the months succeeding October of 1929 the DJIA has not recovered to its highs of 2007 and 2008. It is still 43% down. But if you have the cash then it is probably time to buy or begin preparing those '...woulda, shoulda, coulda,' speeches for 2014.

John in Michigan, USA on :

Yes Wall St profits are up. Free market cheerleader Lawrence Kudlow says this is the free market and uses Wells Fargo bank as an example: [url=http://kudlowsmoneypolitics.blogspot.com/2009/04/messages-behind-wells-fargo-profits.html]The Messages Behind the Wells Fargo Profits[/url]: "Big numbers on mortgage refis and purchases helped Wells Fargo. [i]So did the interest-rate spread, where banks can borrow short at a zero rate and lend long at 5 or 6 percent.[/i] This is the upward-sloping Treasury yield curve that I’ve been talking so much about." Kudlow fails to point out that part of the reason this interest rate spread exists is, banks for the moment have an implicit guarentee of government support if these loans fail. Banks are taking short term government debt, marking it up 5-6%, and (in the short term at least) the government bears all the risk of default. So it should be no surprise they are making money! In the medium term, we have to worry if we're re-inflating various asset bubbles. We also have to worry about what I call the Treasury Bubble, which is the idea that private capital, soverign wealth funds, etc. will continue to finance US debt forever, as if that debt is essentially risk-free (it is not). I am as much a fan of free markets as anyone, but we shouldn't give them credit for monetary policies that are set by central banks.

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