The market rallied for a couple of hours on news of the $100 billion dollar Spanish bailout (which everyone is calling the Spailout) … and then crashed.
Bloomberg notes:
U.S. stocks fell, following the biggest weekly rally in the Standard & Poor’s 500 Index this year, as optimism over Spain’s bailout plan gave way to skepticism it will succeed in halting the debt crisis.
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“The Spanish deal is another Band-Aid,” said Matt McCormick, who helps oversee $6.2 billion at Bahl & Gaynor Inc. in Cincinnati. He spoke in a telephone interview. “Many investors are viewing this with skepticism. The problem is not going to be fixed by this amount. It’s not a solution, and people know the difference. Expect more volatility not less.”
CNBC writes:
Stocks accelerated their selloff in the final minutes of trading to close down more than 1 percent across the board Monday, as initial euphoria over Spain’s bank bailout fizzled and amid ongoing fears over a global economic slowdown.
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“A lot of people were concerned over the size of the bailout—we were expecting something closer to 150-200 billion [euros] and we only got 100 billion,” said Phillip Streible, senior commodities broker at RJO Futures. “So once traders started to digest [the news], they started to take profit or sell into that rally because they think that in another 3 to 6 months, Spain’s going to have to come back and ask for additional money.”
Zero Hedge says:
As evidenced by today’s reaction to the bailout, which had a half life of 2 hours, and was a complete failure in 6, the market is learning much, much faster than expected.
This “Spanic” over the Spanish crisis is occurring even before the ink has dried.
Nobel economist Joe Stiglitz pointed out the Ponzi scheme nature of the whole bailout discussion:
Europe’s plan to lend money to Spain to heal some of its banks may not work because the government and the country’s lenders will in effect be propping each other up, Nobel Prize-winning economist Joseph Stiglitz said.
“The system … is the Spanish government bails out Spanish banks, and Spanish banks bail out the Spanish government,” Stiglitz said in an interview.
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“It’s voodoo economics,” Stiglitz said in an interview on Friday, before the weekend deal to help Spain and its banks was sealed. “It is not going to work and it’s not working.”
Credit Suisse’s William Porter writes:
http://www.zerohedge.com/contributed/2012-06-12/spailout-has-already-failed
Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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