April Stock Talk

CROX is showing nice action this a.m. As posted earlier this wk, I think it will see 14 again by the start of summer and picked up some June 7.50 calls for 3.30 to back up my opinion.

Yeah -- we've all heard how bad it is in the financial sector. That still doesn't make it a good idea to throw more cash at companies and hope that this time they'll be responsible enough to handle it.

Blowing bubbles
There is absolutely no way this will end well. The Central Bank's rates are far below what any sane private lender would require. As a result, these companies may get addicted to the Fed's funding and thus be unable to go it alone again. As a result, this "temporary emergency measure" could easily become a "standard part of doing business," with taxpayers shouldering the costs of failure.

In other words, these quick fixes are both delaying the inevitable and risking public money.

Stop the madness
We don't know exactly when that next bubble will fully inflate or when it will collapse. As long as the first response to any financial stress is a quick infusion of cheap money, the formation of the next bubble is a virtual certainty.

The recession that the Federal Reserve is trying to prevent may be painful to live through. Unfortunately, the other alternatives at this point appear to be either a largely worthless currency or a Japan-style decade of economic stagnation. With options like that, the short-term dislocations from a recession don't seem nearly as bad, especially given the welcome benefits that come in their wake.

Pick your poison. We're at a critical crossroads, and history has shown that too much cheap money can quickly become very expensive.