This Is A Relief Rally- Not A Bull Market

Stock markets rallied as a form of relief from possible Armageddon. There will be no default and  at worst a rating reduction to the quite satisfactory AA+. Note that the preachers of doom in the form of interest rate spikes were wrong, dead wrong; The 10 year Treasury yield– the most sensitive measure of the cost of borrowing money remains mired at 2.84%. Mired that is in cheapness. Mortgage rates will adjust reasonably. Banks will continue to coin profits from the steep yield curve.

We have officially entered the Age of Austerity. Less government spending. Cuts in Medicare and Medicaid, a means test for Social Security. But, we were dragged screaming and shouting there by this dreaded Tea Party movement that thinks its perfectly just NOT to tax rich people to pay for the deficit.

As for myself I guess when you look at the numbers- $2.5 trillion cut over 10 years–or $250 billion a year– that’s small potatoes– less than 2% of GDP.  Not desperately unimaginably tough to handle.

Still, we have stained ourselves, again after the 2008 debacle when our excesses in the financial system almost did the world in. Now, we are still facing recuperation, meaning that everyone has to pay a bill for  an extended time– maybe forever. Ain’t no bull market to come of that.

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