Ethan Harris, head of economics research for North America at Bank of America Merrill Lynch, used an interesting phrase in a note published on May 28: âTape bombsâ (npl) â news stories that have the effect of encouraging risk aversion Hereâs Harris on investorsâ fragile psyches: It goes without saying that there is a big psychological element in capital market crises. The risk of a sell-off had been growing in recent months as many strategists were looking for a âcorrectionâ and as the European crisis continued to percolate. Once the sell-off spread outside of Europe, it has been fed by new negative stories. As Table 2 shows, the drop in stock prices and the rise in credit spreads have been fed by a steady, and diverse, diet of âtape bombsâânews stories that have the effect of encouraging risk aversion. Individually, these stories could probably be handled by the markets, but collectively, we think they undercut any attempt at a rally. He continued: In the coming weeks we expect a more balanced news flow. European governments are likely to complete the approval of the â¬750 bn bailout package. The German Parliament attached its ban on naked shorts to the bailout legislation, and with that legislation finished we hope there will be no further negative news from the German Parliament. Peripheral Europe is likely to move forward with its austerity plansâthe Greek government has already delivered its first year plan and Spain has agreed to significant cuts. In the US, there should be greater clarity about the financial reform bill: we expect some of the most onerous components to be removed and we expect the Fed to be given discretion to implement the new rules in a reasonable manner. Chinese authorities are likely to continue to assure that they will move forward carefully in both tightening policyand in managing the foreign exchange reserves. Of course, the news will not be uniformly positive; in particular, we expect strike activity to spread in Europe.(For âbalanced news flowâ read âskewed to the positiveâ). (For âmore balanced news flowâ, read âskewed to the positiveâ). http://ftalphaville.ft.com/blog/201...a-tape-bombs-hurt-the-rally/?updatedcontent=1
Governments should now encourage the dissemination of positive news to hold up the world markets. Negative news should be discouraged. The stakes are too big.
As if anyone didn't already know, this guy is a complete fucking idiot who is hopefully kept a long way from actually managing any real money.
That's so much more palatable than "tangible manifestation of fraud, rot, incompetence and corruption" or "gigantic sell-side liquidity".
He must not know "the rule"!... It is bad to panic...but, if you are going to panic - panic first! -gastropod
BAM-L. That's pretty funny right there. And the whole so-what-if-everybody-spends-more-than-they-make, the-evil-speculators-killed-the-economy, that's hilarious right there.