The ECB Bailout

The business media airwaves are still filled with arguments about the cause of the Thursday elevator-shaft ride of US equity markets late in the afternoon.

No real news there. This morning's CNBC "debate" with the usual regulatory suspects, including Ned Reilly, Elizabeth Nowicki and Jacob Frenkel, got nowhere. Ms. Nowicki was decidedly more informed and credible on this topic than the last one on which I saw her opine on CNBC.

Together, though, the various pundits shed no real new light on the existing gulf between the NYSE human, stock-specific 'circuit breakers,' and the NASDAQ's lack of human intervention. It doesn't take a genius to realize that if one exchange, with most of the liquidity, takes "breaks" at its own discretion, while other markets trade on, then discontinuities are going to occur. Nobody has yet provided justification for breaking those NASDAQ trades. And there are none. If you elected to trade during a market downdraft, you should get that for which you asked. The arbitrary trade-breaking after the fact is unconscionable. No matter that the NYSE, which caused the problem, is finger-pointing at the NASDAQ for breaking trades.

At this point, you can assail Congress and the SEC for allowing this situation to even occur.

But the real news is the spectacular rebound of the S&P, up to 1155 in pre-trading futures at 9:20, on the strength of the ECB bailout of the Euro and all the potential Eurozone countries requiring help.

The US equities market will no doubt open on an upward tear for the morning.

Of course, the longer term consequences of the ECB $1T bailout fund is much more sobering, and hardly cause for this bounce.

First, the ECB isn't the Fed. Europe's economy isn't the same as the US economy.

Just where is the value to be found underpinning this sudden materialization of one trillion Euros?

Sure, we hear that there will be Euro-quantitative easing, just like in the US in late 2008. Greek bonds are trading up and spreads are down.

Everyone feels that the bottom has been put in, once again, by a financial regulatory authority.

Hooray!

Where is all this money actually coming from? Is it real, or just a printed, time-shifted value play by sovereign governments, and their agents, to cover sovereign shortfalls for a few years?

By the way, in case you hadn't noticed, between the IMF and the Fed's own promise to join the party on quantitative easing, this means the US sovereign balance sheet, already stuffed with subprime mortgages and other financial toxic waste, is going to get some more.

Funny, weren't we just debating how overstretched the US balance sheet is? How much debt we'e created and excess money we've printed?

Maybe investor confidence has returned relative to last Thursday and Friday, which, together, accounted for a loss of 4.7% on the S&P.

Can it last?

Already this morning, before the open, many pundits were looking to today's close and warning of a false rally and more equity declines ahead.