[OPE] The bull market in borrowed capital

Wall Street risks red October as rebound looks frothy
Reuters, Fri Sep 18, 2009

(...) Unusual simultaneous rallies in equities, U.S. government bonds and
commodities are linked to one factor: super-cheap monetary policies adopted
around the world. Bank stocks have led the runaway U.S. equity markets which
have catapulted indexes nearly 60 percent above March lows. This has meant
better earnings, rising profits and bigger bonuses. "We're in a sweet spot
for the financial cycle," said Jonathan Basile, economist at Credit Suisse
in New York. "Central banks are in no hurry to remove stimulus, so that
suggests risky assets could do better and fixed income could also do
better."

An analysis from Bespoke Investment Group captures the lightning speed of
the rush into equities. Six months ago, the S&P 500 .SPX was trading further
below its 200-day moving average than at any other time since the Great
Depression. "Today, we are in the midst of one of the strongest bull market
rallies since the 1930s," Bespoke said in a report. "This has helped to lift
the S&P 500 further above its 200-day moving average than at any other time
since 1983."

Few disagree with Federal Reserve Chairman Ben Bernanke's contention that he
had to flood markets with cash to prevent another Great Depression. But
critics say his tactics pose risks of their own, making it harder for
monetary authorities to gauge the exact level of stimulus their measures
deliver. (...) Goldman Sachs reported $3.4 billion in second-quarter net
income, its best performance ever. Yet bank profitability is expected to
come under pressure from both increased credit losses and a tighter
regulatory environment. JP Morgan estimates new rules alone will reduce
long-term earnings potential by a quarter. Beyond that, a grim housing
outlook and high unemployment cast doubt on the viability of any
consumer-led expansion.
http://www.reuters.com/article/ousiv/idUSTRE58H53320090918?pageNumber=2&virtualBrandChannel=0

Surge in trading by small investors
By Steve Lodge

FT September 18 2009 22:15

Stock market trading by small investors has surged to levels last seen
during the "dotcom" boom, with many thousands of people buying into the
strong recovery in shares that on Friday sent the FTSE 100 to its highest
this year. Some of the country's biggest brokers say a "tide" of individual
investors - frustrated with the low interest rates on offer in cash savings
accounts and wary of buying into property - have turned to equities in the
hope of riding a six-month rally that has propelled the blue-chip index to
levels almost 50 per cent above its March low.
http://www.ft.com/cms/s/0/7a9acfa2-a494-11de-92d4-00144feabdc0.html

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Received on Sun Sep 20 14:24:04 2009