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Geithner, Bernanke Digest Eurozone: Dave's Daily



On Tuesday, Tim Geithner confirmed the U.S. would add to the rescue fund for Europe via the IMF. While many don't like this, there is nothing to stop them politically from doing so. More money will be printed and "the can" will be kicked further down the road. Believe it or not, U.S. banks have recapitalized and profited through TARP. European banks need to be recapitalized and this hasn't been done yet. Europe doesn't have the political authority to do this and Ben and Timmy feel compelled to help. They've gone too far down the "bailout path" to stop now. Besides, it's an election year and not much else need be said.

Another "down the road" minefield lies in Japan. Their demographics are poor and population is declining rapidly. Being as xenophobic as they are immigration is not an acceptable solution. Their debt is high and the Japanese save heavily buying JGB (Japanese Government Bonds) but, the number of buyers is falling and the debt is increasing. It will end badly. Last night the Japanese government decided to give a gold coin (.50 oz) for each $129,000 of bonds purchased - a clear sign of trouble ahead.

U.S. markets want to rally seasonally. With Ben and Timmy in to provide some temporary help, bulls are convinced troubles will be papered-over (literally). This is the cue to buy and they're trying hard to do it no matter every obstacle thrown in their path. S&P's downgrade threats yesterday were just one such example. Post election troubles in Russia, violence in Syria and threats from Iran can be easily brushed aside until they can't. So let's buy stocks is the thinking.

Stocks rallied in mixed fashion Tuesday as investors seemed timid overall given more news from the eurozone developing throughout the week. Stocks were held back by tech primarily and consumer sectors. The dollar was flat, bonds were weak and commodities mixed.

Volume was light once again and so was conviction. Breadth per the WSJ was mixed to negative.

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