Saturday, March 22, 2008

"The Worst Risks of the Credit Crisis Averted"- Donald Luskin

DeLong and Krugman's favorite blogger says "It's time to buy", at least in certain sectors.

Key point:

"So here's where it leaves us. We can never be certain, but it looks to like even though there will still be plenty of problems coming from the financial sector due to the sins of the past, the most horrific risks are off the table because the Fed has made it clear it will step in and keep the worst-case scenario from happening.

So it's time to buy all the stuff that everyone's been selling during the credit crisis. Junk bonds. Municipal bonds. The US dollar. Stocks. And yes, financial stocks.

But it's time to stop buying gold and shorting the dollar as inflation plays. Oil and other industrial commodities may be a different story, because their prices are driven as much by growth as by inflation. But it's time to say goodbye to inflation as an investment theme.

There will still be plenty of inflation in the coming months and years, because the mistakes the Fed has made already. But inflation-driven investments won't make sense anymore, because they are motivated not by inflation already in the pipeline, but by the risk of worsening inflation yet to be set in motion.

The worst-case market scenario is off the table. It's amazing what can happen in just a week. Amazing, and in this case, very wonderful."

Of course, the doom and gloom pundits, the Lame Stream Media, the political opportunists who want financial disaster, and those who criminally manipulate financial markets in a time of turmoil (and don't get busted) won't like to hear that.

All of the afore-mentioned bottom feeders stand to lose if common sense and good judgment prevails.

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