European Central Bank drops the ball
Poorer countries like Italy and Spain need to know there's a backstop as they adopt austerity measures. And bond investors need reassurance.
Still reeling that the European Central Bank didn't do more. Reeling that they didn't understand that the sovereigns need help in return for the austerity they have to administer to their budgets.
Yes, these poorer countries like Italy and Spain have spent too much, have profligate welfare states and have let others pay for their errant ways, but if they are going to continue their belt-tightening austerity ways, they need to know there is a backstop. They need to know there is a rescue or else it isn't worth it and they will just risk going under.
No wonder, after all the tremendous bond advances in Spain and Italy, they got killed Thursday. Those who bought those bonds believed, reasonably, that the ECB would stand behind them.
Lost in all of this is that the governments in Europe had begged these banks to buy this debt not that long ago. That doesn't absolve these banks from the reckless borrowings they made against them. It doesn't absolve these banks from their moronic risk controls and their inability to take losses. Nor does it absolve the authorities from demanding capital raises earlier. Thursday's announcement that the banks have to raise 115 billion euros seems too little, and for some, too late.
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Everything was going right early Thursday morning. Copper was rallying off the idea that there might be some pro-growth initiatives out of Europe beyond the rate cut we got.
Gold (-GC) was rallying on the supposed knowledge that the ECB would print euros to backstop countries. The CurrencyShares Euro Trust (FXE) was moving up in recognition that the euro would be saved.
Then everything reversed. Copper slowed, FXE went the wrong way. And gold showed that the ECB has taken a deflationary course, the opposite of what is needed for equity markets.
Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for his charitable trust.
No wonder, after all the tremendous bond advances in Spain and Italy, they got killed Thursday. Those who bought those bonds believed, reasonably, that the ECB would stand behind them.
Buying those bonds is like buying a black and white TV with the promise from ECB that it will turn in a colored one; maybe, but are you still alive to see it? I still think like… never. To reduce a deficit of over 1 trillion by doing cuts that in the end are still increasing you debt but slower is brilliant. I like when the market goes up because the politicians think of doing something or having a decision that in the end does not solve the root problem. Keep up the good work everybody!
If you have been thought by a university economic laws that bring nations and market like now then do not expect much.
Jimmy : I read somewhere that first impressions are vital in business , but you have put some serious holes in this thought process for me , Really Jimmy, look at your mug shot here , you have the smirk of a shady person . When I see your actions on TV I ask my self, how did he get that job .When I here you speak you remind me of a pitchman selling vitiams on some infomerical.
Your like a bad show that does not get cancled , there is kno logic here .A couple bright spots I see is ,your pundent Buddys are just as bad,or worse and there is a little bit of entainment value in what you do
go jimmy go hasta nunca
every time this clown touts his "thesis" of homework,rigor ,and high yield please
remember the following facts:
NOBODY can legally know if the books are accurate or the yield is safe so gambling on individual stocks is VERY risky
if you have an opinion , etf's offer instant exposure and instant diversity long or short
and can be hedged using options
PS......THE UNFUNNY COMIC WHINES ABOUT THESE ALL TIME TIME SO YOU KNOW THEY ARE GREAT
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