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Bad News is Good News?

January 17, 2012

Wall Street jumps after China data

By Chuck Mikolajczak
NEW YORK (Reuters) – Stocks gained in early trading on Tuesday as Chinese data fueled the belief the government may move to stimulate growth, overshadowing recent credit downgrades in Europe and a mixed bag of big bank earnings.

So the DOW was up over 100 points this morning, and this headline is reportedly why Wall Street is so cheery. China’s growth (GDP) came in at a 2 ½ year low, fueling expectations that their government will move to stimulate growth. In other words, the news is bad enough to justify more stimulus. (It is the “bad economic news is good news for Wall Street” syndrome all over again.) I don’t think the stimulus will be coming from the government, but rather from the central banks. More liquidity… wahoo, isn’t that just what the doctor ordered? I’m so glad that we have discovered that money does grow on trees after all!!

Credit downgrades in Europe, Greece’s potential default, employment numbers not looking so robust after all, etc. etc. Hey no problem, hit the print switch! When we are doing QE 10, will it finally be time to wonder whether this strategy might not be working?

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