Thursday, November 18, 2010

Ireland: "We don't need no stinkin' bailout, but we'll take one anyway"

Global markets are surging on word that the Irish are set to take another bailout from the EU. It's remarkable how similar this is to what the banks said back in 2008. Remember the "we're well capitalized" stories until they went belly up or were bailed out? As late as this week the Irish were adamant that they were not in need of a bailout but now there is a bailout on the way to the tune of "tens of billions" of Euros.

GM will clearly benefit from pricing it's IPO into the face of a global rally. Virtually no stock made it's way into retail hands so I expect a pretty solid demand after the IPO, but I also expect a fair amount of selling because GM is basically the same company that went bust last year with less debt. The company rocked the first 3 quarters of 2010 due in large part to fleet sales (rental companies, state/federal government purchases) but they have already said that Q4 will be substantially weaker. The smartest car guys I know seem to think GM still has huge hurdles in front of it, but today it will be all about the GM success story (even though we're still losing money on the stock the Treasury is selling today).

The sentiment in the market has swung dangerously high. The percentage of investors that are bullish is at it's highest level since Dec 2007 when the market was still just 2 months removed from it's all-time peak. Since investors are usually wrong, the high percentage of bullish investors is a warning flag for many market followers.


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