Happy Days are here again...Monetizing your Debt.

Our wondrous central bankers in this world still believe the current economic crisis can be solved by monetizing the debt.  Let me make this clear THIS CRISIS IS NOT A MONETARY CRISIS, it is a debt crisis.  A debt crisis is where countries and citizens spend too much and have too much debt to service and pay down. But this morning the central banks of the world are back at their old game of monetizing debt or printing more money to make things easier when problems occur with liquidity. Oh, it makes markets jump with joy and legislators smile in delight, but like a drug the effects wear off quickly and we are back to the same situation. Either we cut spending and go about paying off debt or we screw the debt holders by either hyperinflation or just default.  This likely buys Europe another week.

 

The real thought this morning is that IF the central banks decided to do this as a group, just how bad is the situation in Europe? Frankly this should make one more worried than filled with joy as an investor.  If you own stocks today would be a good time to lighten up by selling into the upside.

 

Joy was also administered in the form of sharply higher housing sales. But if one reads into the weeds you find the realtors surveyed also cautioned that lately many "sales" are canceled due to bad credit, no credit, no down payment, and bank concerns about loaning to anyone now. Add in that many of the sales are "short sales" where investors are fishing for deals that could likely get turned down at the bank level again. The best way to tell if people really are buying homes is the new and existing 30 year and 15 year loan rates which would move upward if demand improved. Checking Bankrate you will find they have moved down in the last month and are presently stable.

 

Maybe the ADP jobs report that shows nicely increased private sector jobs gains is the real joy of the morning. Well not so quick as these reports have proven not to be too trustworthy an indicator of job gains.  Ditto for the Friday report from the federal government that has proven almost totally worthless other than a political tool for the current administration. Maybe the jobs picture is improving, but frankly I need more proof than these reports. I expect much of this is some of the leveling off of layoffs not any uptick in hiring.

 

Maybe others are filled with joy, but I remain cautious, very cautious. As I mentioned yesterday investors and traders now are more conditioned to emotional moves than thinking moves.