The Bankwatch

Tracking the consumer evolution of financial services

Why this market rally will end in tears | DAVID ROSENBERG Globe & Mail

I thought this quote from David summarised his article perfectly as we watch the second bear market of the century wend its way.

Why this market rally will end in tears | DAVID ROSENBERG Globe & Mail

‪Just as the 2003-07 bear market rally was built on a shaky foundation of unsustainable credit and house price appreciation, the current bear market rally has been built on even shakier ground of surreal public sector intervention. This may well have “saved the system” or “prevented a depression” back in the opening months of 2009, as many like to believe. However, the reality (and even former Communist regimes figured this out a few decades ago) is that there is no such thing as a free lunch.

He speaks of the lack of basic underlying support from demography, or returning vets, that accompanies a true bull rally such as the:

long-term bull run such as 1949-1966 or 1982-2000.  It (2003-07 bear market rally) was a classic bear market rally, and it ended in tears because what drove the market upward was phony wealth generated by a non-productive asset called housing alongside widespread financial engineering, which triggered a wave of artificial paper profits.

Written by Colin Henderson

January 18, 2011 at 23:14

Posted in Uncategorized

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