While reading more on the Egyptian riots in a Bloomberg article, I found this nice quip on global equity prices.

European stocks retreated this week as escalating protests in Egypt and an unexpected drop in the U.K.’s gross domestic product offset accelerating U.S. economic growth in the fourth quarter.

Next Plc, Britain’s second-biggest clothing retailer, slumped 7 percent this past week as the U.K. economy shrank.

“Some of the European data was weak and the U.K’s gross domestic product was lower than expected, although the message on the U.S. economy is still okay to good, which should support equity markets going forward,” said Simon Maughan, co-head of European equities at MF Global UK Ltd.

Creative Art of Bullish Excuses

That statement from Simon Maughan is just the kind of “BS” I talked about in Market Participants “Learn the Wrong Lesson” from Bernanke; Conflicts of Interest in “Stay the Course” Advice.

It is more than a stretch to suggest global equities will be fine on the basis of the US economy alone, especially when there should be huge concerns about the imbalanced, stimulus-fed US economy and the unbalanced global economy in general, especially overheating in India and China, and property bubbles in the UK, China, and Australia.

Moreover, Maughan did not mention valuation, or risks. He was simply looking for any excuse to say “buy stocks”.

I do not know whether the stock market goes up or down from here, but his statement is absurd from many angles, especially valuation.

Hook Has Been Set

If stocks do head down now, a hook has been set. That “hook” is blaming this all on Egypt, with a message “buy the dip”.

One of these “quick, little dips” will be neither quick, nor little. Whether this is the one, remains to be seen.

Mike “Mish” Shedlock
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