Do not be fooled. I repeat do not be fooled. Today's strong move up is what is known as a relief rally. Nothing more than relief from investors that Europe is going to bail out Greece. The problem is THAT THE SOMEONE that is being hit with the bailing out bill has bot been decided. Oh, I know you have heard the European Bank or maybe some private European banks, and maybe a country or two. In the country part that is read as Germany. In the end that someone will have to be the taxpayers of some country and that someone is likely to be German taxpayers and US taxpayers.
This patchwork of an agreement has been orchestrated by President Obama and Prime Minister Angela Merkel who both or protecting their political futures. Ms. Merkel who needs help for just a few months and Mr. Obama who needs help for a 13 month period. In the end it solves nothing and makes none of the hard decisions. Sooner or later someone has to take the bath in debt and losses of several hundreds of billions of dollars and that little detail is still a blank to be filled in.
If the parties involved can hold this gang together and keep the bail out money flowing until Obama gets reelected or at least past the election this house of cards will fall apart and frankly it might happen sooner than that.
As an investor consider holding off on your investments. As a trader use this up tick to lessen your load. I also caution that as we move closer to the US election ignore government economic statistics as they are prone to be hedged to protect incumbents of both parties. Best to rely on private reports and other economic data for your direction. Note that the GDP today was up to 2.5% growth and the market said whoopee, but expect revisions downward the next month or two. Note that several companies in the recent reporting period have reported disappointing earnings and that says we are not near the end of the economic troubles.
Full disclosure I took out a large option position against this rally this week.
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