The Dow has soared a whopping 30% since March 9, but Andy Kessler doesn’t think the good times are here again. “This sure smells to me like a sucker’s rally,” he writes in the Wall Street Journal. Earnings aren’t up. The market is just responding to three government actions:
- The “stress tests” have made nationalizations seem unlikely.
- With the Fed’s rate at close to zero, only stocks offer decent returns.
- The Fed is basically printing money, buying $300 billion in bonds and $750 billion in mortgage-backed securities.
The result? A big rally, into which the banks are selling stock to raise capital. “It’s almost as if someone engineered a stock-market rally to entice private investors to fund the banks rather than the taxpayers,” writes Kessler. “See why I believe this is a sucker’s rally?”