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It was a major rescue attempt to patch up yet another portion of the beleaguered global financial markets, as the ECB proposed a massive stimulus package including negative interest rates and bond purchases of both sovereign and corporate paper.  The result was a significant rally in global equity markets given that the areas to park money are once again being limited to the equity sector.

This move surprised and disappointed many as it simply increased a distortion of risk in financial markets.  What you have is one last attempt to kick the can to save economic growth by propping up financial assets and this spells danger in a big way.  Although risk in fixed income paper seems to be averted by official purchasing…the promotion of mal-investing by funneling liquidity to equities and higher risk assets is shocking.

The Doc’s call on the short term upside for stocks we mentioned last week has followed through nicely.  Our call last week for a short term sell-off in Gold was in line as well.  We will now go neutral on all markets and mention that a more “non-free-market” scenario seems to have reentered the marketplace.

The higher equities go…the more risk is implied.  Metals fundamentally look great but be careful of less than free-market forces.  What a shame…


Stephan Kudyba (MBA, PhD)                      THE MARKET DOCTOR


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