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MONDAY, NOVEMBER 23, 2009
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 OPINION 
1

This Rally Is for Suckers, Courtesy of the Fed

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(Newser) – 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?”

Specialist Frank Masiello works at his post on the floor of the New York Stock Exchange Wednesday, April 29, 2009.
Specialist Frank Masiello works at his post on the floor of the New York Stock Exchange Wednesday, April 29, 2009.   (AP Photo/Richard Drew)
Traders visit the post that handles Bank of America on the floor of the New York Stock Exchange Monday, May 4, 2009.
Traders visit the post that handles Bank of America on the floor of the New York Stock Exchange Monday, May 4, 2009.   (AP Photo/Richard Drew)
Federal Reserve Chairman Ben Bernanke testifies before the Joint Economic Committee on Capitol Hill in Washington, Tuesday, May 5, 2009.
Federal Reserve Chairman Ben Bernanke testifies before the Joint Economic Committee on Capitol Hill in Washington, Tuesday, May 5, 2009.   (AP Photo/Susan Walsh)
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For now, the market appears dependent on a hand cranking out dollars to help fund banks. I'd rather see rising expectations for corporate profits. - Andy Kessler

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