The Pros and Cons of Recent Financial News
The news always lends itself to an array of varying interpretations. Today is no exception. People will glean from the headlines what they want to hear, of course…and then pimp the data points out to arguments that support their own point of view. In other words, they will come to believe what they must, when they must. To illustrate our point, consider briefly the following three headline-grabbing trends:
1. Banks are repaying their TARP loans…
…as good news: Last night Wells Fargo joined Citigroup Inc. in pledging to repay in full their loans from the Troubled Asset Relief Program. Stocks rallied to fresh 14-month highs on the news.
Or…
…as bad news: Those same institutions are unloading mortgage backed securities and other toxic assets – almost dollar-for-dollar – onto the Fed’s balance sheet at an increasing rate. Now they can hammer the government (ahem, taxpayer) for more wiggle room AND unshackle their highflying CEOs from those pesky salary cap provisions included in the TARP.
2. Sovereign debt fears abate after Abu Dhabi backstops Dubai debt…
…as good news: Oil-rich Abu Dhabi flung a $10 billion check Dubai’s way after the latter, rascal emirate logged up more debt than it could ever hope to repay.
Or…
…as bad news: Sheikh Mohammed bin Rashid Al Maktoum, the silk dishdasha-clad ruler of Dubai, still has to find a way for his gaudy emirate to meet some $80 billion in other debts and liabilities. Oh yes, and the place still has next to no oil and a surplus of everything expendable in a crisis…from indoor ski slopes to Swarovski-encrusted license plates and island real estate projects slowly eroding into the Gulf…
3. Gold continues correcting and stocks continue soaring…
…as good news:Daily Reckoning readers can continue following our trade of the decade – buying gold on dips and selling stocks on rallies…
Or…
…as bad news: Those same readers must continue to suffer the pervasive recovery rhetoric dolled out by unthinking neckties in the mainstream media…for now…
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