Liquid hope

I'm not a huge fan of "chart of the day" on Bloomberg, as you run the risk of people data mining the past to fit a novel idea. Yet today's post highlights an interesting side effect of the large amount of cash sitting on the sidelines.

According to the article, this large amount of liquidity is a foundation to sustain the recent stock market rallies. Well, theoretically perhaps - but let's remember why that cash appeared in the first place. A greater cause for concern is that the fact that earnings season will soon be upon us, and it's a fair bet that results will be, in many cases, totally ghastly.

Still, I think there might be a bit of froth left to go in the market (with the caveat that my short timing is far from perfect). Yet at some point the realisation will dawn on investors that we're in for a painful and slow crawl, not a "snapback" recovery. Wells Fargo was a blip, not a green shoot of recovery. Come on, in this market, any bank left standing SHOULD be announcing great earnings - after all, any loans being written will be at very healthy margins (shame about the 2006-2007 loan book though!).