What happens when premonitions for a bailout cut two ways?
Do you believe the jack-up and happy response in overseas markets over the weekend and, early Monday morning in the United States, which sent financials like Bank of America (BAC), Citigroup (C), JPMorgan (JPM) and Morgan Stanley (MS), as well as cyclicals like Alcoa (AA) and Caterpillar (CAT) roaring before 10 a.m.? Or do you believe the dodgy, world-weary response that set in soon afterward, causing all those stocks to plummet before noon?
So which should it be: A torrid love affair? Or a platonic relationship that titillates, then snaps off or fizzles?
Hit the cold shower.
Europe is suffering immeasurable systemic trouble. Any self-satisfied notion that it can be solved with a basket of cash here -- or there -- is reckless.
At this point, bailouts amount to throwing bad money at good. Cash bailouts might be a balm, a temporary fix, but are nothing that will make the financially lifeless trope that is Europe viable, much less return to peak form.
It doesn't matter whether it's Spain, Italy, Greece, or a growing number of American states of localities, for that matter. The deficits, coupled with a lack of growth and financial responsibilities that go out across generations, are ruinous until addressed. Cash doesn't address it. It only pushes back by a matter of hours the moment when it has to be addressed. The fact that these fleeting moments of false conviction are still so prevalent speaks to the lack of understanding, a resistance to a serious reality.
And that's no good. Ignore reality at 10 a.m. and it'll burn you by noon.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
