Blue Nile: Color Me Skeptical

Stocks surged Thursday to multiyear highs on the back of the European Central Bank's announcement of a sovereign debt-buying program and better-than-expected economic reports. Stock indices closed approximately 2% higher across the board. Color me skeptical, but I am not a strong believer in this rally and I took the opportunity to move another 5% of my portfolio to cash on the close. I also instituted another short position on a soaring online retailer whose valuation is overstretched. There are three macro reasons for my skepticism.

First, regardless of this latest ECB program, the situation in Europe is grim. The continent has major structural problems that will take years to resolve, if they can be fixed at all. Spain is approaching 25% unemployment levels and it and Italy increasingly look like they will both need some sort of bailout in the next year. The fact remains that a good portion of Europe (Greece, Portugal, Italy, Spain) remains uncompetitive, is unwilling to make the structural changes needed to enable job growth, and does not have the ability to devalue its currency. Even Germany, which has been the main European growth engine, is starting to see its economy decelerate sharply....409 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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