Markets Respond Positively to Talk of Greek Bailout

I try not to put too much stock in these one-day “why is the stock market doing this or that” stories, but I noticed that today stocks are rallying as people think there will be some kind of EU rescue/bailout for Greece rather than a catastrophe. And though I haven’t made a scientific study of the matter, my impression is that this has been the pattern throughout the great financial crisis. Among the pundits, there’s a great deal of talk about the need for balance and restraint and worry about this and that but in the markets every signal that there’s going to be forceful intervention by strong players (US, China, Japan, Germany, France, etc.) is greeted with cheers. That can be TARP, that can be aggressive credit easing by the Fed, that can be the US stimulus or the bigger Chinese stimulus, or now talk of a Greek rescue. It’s never “markets crash in anticipation of future moral hazard problems.”