WASHINGTON, January 22, 2015 – At least as of 3 p.m. EST, Thursday seems as if it’s set to become 2015’s happiest day on Wall Street, at least as far as this miserable January is concerned. The Dow is up a whopping 263 points as we write this. Both the S&P 500 and the tech-heavy NASDAQ are smoking-hot as well, with the former up nearly 29 points and the latter rallying nearly 75. It’s irrational exuberance on steroids.
The reason: After at least two years of endless promises with no delivery in sight, European Central Bank (ECB) President Mario Draghi today finally decided (with the permission of Eurozone bosses, of course) to embark on Europe’s first stab at QE, or quantitative easing. It’s similar to the program recently ended by the U.S. Federal Reserve after several years of stock-market friendly but economically dubious stimulus.
According to CNBC, “The ECB’s program will be open-ended, but will last until at least September 2016, said Draghi in his regular press conference. Corporate and government bonds will be purchased to the tune of 60 billion euros ($69 billion) a month.”
The U.S. flavor of QE, aka “quantitative easing,” might have worked better if either the current Administration, the Democrat-controlled Senate, or both had actually consulted with legitimate adult economists and had actually done something to help businesses recover and unemployed individuals get back to work. But instead, the focus was on eliminating the Republican Party at all costs.
What did that get the Democrats? The loss of both Houses as of Election 2014. Oh, yes, and the blame for the utterly stagnant U.S. economy, which might have recovered years ago if the Dems had paid slightly less attention to their obvious priority of turning the U.S. into a one-party banana republic like Venezuela.
Which gets us back to Europe. After all the foot-dragging, it’s finally occurred to Europe’s own political elitists that actual job creation might be a good thing for that continent’s tanking, vulnerable economies. So it’s onto massive bond-buying via the complex mechanisms of the Eurozone, the better to dampen the Euro still further, making European exports cheaper and cheaper on world markets as well as at home and, hopefully, stimulating jobs to happen and citizens to spend: that good old virtuous circle.
Unfortunately, the Europeans are, if anything, even more feckless than the Washington political establishment. Western democracies have run out of moral and philosophical steam in the 21st century. And if current leaders don’t start producing results some time soon, there very well could be hell to pay, with a very real threat that citizens will start causing uprisings in nation after nation. But we shall see.
In the mean time, we always have today’s headlines, at least for now. And the positive news of Draghi’s bond-buying program has sent the headline-driven HFTs into a frenzied Happy Dance, goosing the averages today to a fare-thee-well.
We’re going to step back and enjoy the fun. No point in chasing things here. We’ll see if the happiness continues during Friday’s trading. Or, somewhat more likely, we’ll watch the numbers go down again as day traders and algorithms book their profits and go cash for the weekend.
After all, the Eurozone is going to have to deal with the small matter of a likely leftist win in Greece’s Sunday snap elections. The betting money is going heavily toward a big win for Greece’s socialistas, with its long-suffering (but somewhat clueless) citizens finally becoming fed up with taking their marching orders from German bankers.
Odds are as high as they ever were for the Greeks to exit the Euro, and God only knows how that will turn out for Wall Streeters when trading resumes on Monday.
The Maven remains pretty fully invested but highly nervous. It’s all a waiting game now. But we’ll at least enjoy the action today. Assuming we don’t tank at the close.