Moral Hazard Be Damned

excerpts from this week's report:

"Last week's plunge should have come as no surprise to investors, provided they held the view that the game that was in force for the past two decades is back on since September 18th. I am referring specifically to the reincarnation of the Greenspan put now the Bernanke put.

During the Greenspan reign, the economy and markets enjoyed sustained steady growth and low inflation punctuated by mini panics from time to time. When needed, those mini panics were met with the prescribed preemptive solution of more liquidity every time pain seemed to be unbearable for important segments of the economy and markets. And why not?

After all, conventional economic analysis says that as long as growth is healthy and inflation muted, pumping more money into the system will not impact those vitals statistics. Of course, a byproduct of large amounts of macro liquidity is yet another bubble. But that is of no concern as each bursting bubble will be met with, you guessed it, more liquidity. Moreover, since each bursting bubble failed to produce damaging global macro effects (growth and inflation), there is little cause for concern (from a traditional thinking perspective).

Which brings us to the current environment..."

also in this week's report:

* Valuation Model
* Model Growth Portfolio
* Investor Sentiment Data
* Chart Focus: MZM
* Sectors and Styles Market Monitor
* Key Economic Indicators

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