D Financial Medicine ....

Let us assume that someone ill since last one year. He visits many doctors, take several medicines, however his disease is not cured. What happens is that every time he goes to the doctor, the doctor gives him a new medicine saying that it would act as a panacea and the moment he intakes the medicine (or only hears the news that a panacea will be issued) he jumps with excitement, goes out to play football and party's overwhelmingly.

The result is that after 2-3 days (or maximum a week) he is again down on bed and becomes more ill. The reason is that he did not allowed the medicine to take effect and heal properly. Simple medicine laws says that if one is down since a year (or any other longer time frame) and being offered a medicine, one should take due rest so that can be properly cure and not get excited and play football or jump.

Then what happens he goes to another doctor or the same doctor issues another medicine thinking that some ingredients in the last one was not appropriate and so a new panacea is announced. Again the history repeats and the patient gets excited and falls sick again. Again a new medicine and again excitement. This continues...

You must be wondering that its a financial blog and why am I writing on medicine... But I am sure that some smart ones must have guessed my rationale behind writing this. That severe ill patient is the global financial market (US to be precise) and the doctors are US FED, Government, etc and the various medicines are 'n' number of bailout packages/ rate cuts announced one after other.

Yesterday again the same patient got over excited, as it has being in the past, Dow Jones Index rising around 5% (in the past this has being 10%, 15%, ...) just after the medicine ($1 Trillion Public-Private Plan to Buy Banks' Bad Debt0m announcement. So what will the result be...?

As it has happened in the past. Every time DOW gets overexcited over some medicine, falls with even higher force and ultimately lower from where it started. Thus I strongly believe that this present rally will also see the same fate, may be today or tomorrow by this week's end.

So once the global financial markets take rest for months and allow the medicine to heal properly (this means no volatility or almost near to zero volatility) then only we can think about the beginning of the next bull markets.