The Bailout Cycle
By Greg Feirman: There is a cycle that seems to be repeating itself in the financial markets the last few years. First, the crisis deepens and risk assets fall. Second, risk assets start to rise as investors anticipate a bailout. Third, government officials and regulators deliver on investor expectations leading to a blowout day. Fourth, the euphoria is short lived and the new bailout is soon met with a sell the news reaction. Risk assets fall and the cycle begins again.
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Most recently, this cycle played out last October and November (see "After Euro-Phoria", October 31, 2011) and it is playing out again right now. The euphoria in response to the €100 billion Spanish bank bailout reached over the weekend ("Latest Europe Rescue Aims to Prop Up Spain", The Wall Street Journal, June 11, A1) was especially short lived as US investors rained on the rest of the world's partyComplete Story »