Green Shoots Stock Market Rally

The green shoots believers seem to be firmly in control this morning as General Motors files for a chapter 11 bankruptcy and the Dow skyrockets up by over 200 points as I write. Humans are a hopeful lot aren't they?

The rally from the March lows of 666 on the S and P index has carried the S&P to above 940 and the Dow from 6517 to above 8700. Anyway you look at it that is an impressive rally. Still, it is a rally that doesn't smell right as evidenced by the last two minute surge last Friday that took the averages straight up on a high volume surge going into the close. That surge was far from normal activity on an otherwise lackluster trading day.

Could it be that taxpayer money given to Goldman and others is finding its way back into the stock markets? Could it be that the government is busy fueling yet another bubble with trillions of dollars in fiat money?

The green shoots that the Obama administration and their very much under control TV talking heads love to gush about are the sort of green shoots that are of the less bad sort. For example, housing prices are still falling but falling at a slower pace than at the end of 2008. Unemployment is still increasing and will likely continue to increase for some time but is not increasing as fast as during the last quarter of 2008. Car sales are horrible and foreclosures continue but maybe, just maybe, they will pick up some fine day.

In a few words the economic fundamentals are still pretty terrible for the United States but Obama has done a masterful snow job on the American people and consumer confidence has soared. After all, GM will be a better company after it emerges from bankruptcy, right? Certainly, the US government will run GM better than automotive executives. Well, maybe better than the auto executives at GM for the past 50 years. How could it be any worse? Still in all of the world the history for government run auto companies is not good.

How long can the con continue? Given the trillions that the Obama administration is throwing at the economy, trillions that, since the treasury is broke, the government has to borrow or to create out of thin air, probably longer than you would reasonably think.

But who can say that creating green shoots with borrowed and with fiat money or that attacking problems of excessive leverage and debt levels by increasing leverage and debt levels is reasonable. The policies being implemented by the government may be increasing the American people's confidence now but I have a sinking feeling that they will increase their misery later. Running 2 trillion
dollar deficits and even larger can not go unpunished forever.

When the next decline gets under way you will want to be out of the way. Better take advantage of the rally, as the big elite boys at Goldman Sacks and across elite land are doing, and raise cash while you can. Green shoots are fragile things. They can whither away and be no more in a New York minute. Still, at least for awhile the trillion of dollars in funny money seems to be in control.