Eric Sprott's just released his latest investment outlook, Surreality Check Part Two: Dead Government Walking. Its a follow up to Surreality Check Part One: Dead Men Walking, originally published in November 2007 where Sprott described the 'bizarro' market preceding last year's credit and financial market meltdown. As usual, its excellent reading, as Sprott does his best to make sense of the senseless:
The equity market performance in November 2007 masked the underlying problems plaguing the financial system at the time, and it's blindingly apparent that it is doing the same again today. The government has assumed most of the financial system's liabilities in a giant game of ‘kick the can'. The calls for a new bull market are coming fast and furious. Market participants are bidding up the stocks of companies that are demonstrably bankrupt, and government balance sheets have ballooned to unforeseen levels. As respected market commentator David Rosenberg recently wrote, "the stock market is divorced from economic reality".1 It's time for another surreality check, but this time it isn't the publicly traded companies that deserve attention, it's the governments that have saved them. Make no mistake - the dead men are still walking - they're just a lot bigger now than they were two years ago, and they don't generate earnings - they print money and tax their citizens.
Download the whole report here.
