Yesterday, US stocks soared. Today, Asia followed. Europe is up. More gains are on the table in the US.

Who can we thank for the jump start in equities? The mainstream press is tripping over itself to hail the efforts of our dearest leaders. Political titans like Silvio Berlusconi, Gordon Brown, Hank Paulson and, of course, George Walker Bush.

Bill Bonner is more skeptical. He says a bear market bounce is not cause for celebration; it’s cause for selling. Bill reckons the Dow will hit 5,000 before long.

More from Bill:

We begin by pointing out the obvious. A bounce in a bear market does not give cause for celebration. It gives cause for selling.

Sell the rallies, buy the dips. Buy low, sell high, in other words.

We’re selling stocks, generally. And this bounce is a good occasion to do so… because we think this market could go a lot lower.

Dow 5,000 is our target.

When the Dow gets below 5,000 we might be tempted to buy. Until then, it’s sell… sell… sell.

Mr. Market is a decent chap, after all. He always gives you opportunities to get out… or get yourself in deeper.

After the market crashed in ’29 for example, prices gained 18.8% over the next two days. Investors should have hit Mr. Market’s bid. Instead, many were convinced that the bottom was in. They took advantage of an opportunity to buy shares at ‘bargain’ prices – only to see them cut in half… and cut in half again.

And then, they had to live with their mistake for a long, long time. Prices did not return to the ’29 high until the 1950s.

There was a rally after the crash of Black Monday in ’87, too. Stocks rose 16.6% over the next two days. This time, buying turned out to be only a short-term mistake; stocks rose for the next 12 years.

The bunkum behind this bounce is that the pyromaniacs who caused this conflagration… and then fanned the flames… are now going to put it out. We recall, for provocation, that Goldman Sachs was a leader in developing mortgage backed securities and swaps – the dry tinder that set off this blaze.

We recall too that Henry Paulson was not only at the head of Goldman while this was going on, but actually pushing the company in that direction.

We recall also that that the US central bank – the Fed – has kept its key lending rate at below the rate of consumer price inflation for most of the last six years.

As for the rest of the world’s leaders: they are little more than careless gawkers… people who drove out to see the woods on fire… and then got caught by the backburn… Now, they’re lost in the smoke and feeling the heat.

Yet, we are supposed to believe that they are creating a new world financial order… and that it will be stable and prosper.

As to the former, we have no doubt. Governments are using this financial meltdown in the same way they used the meltdown of the twin towers in 2001 – to grab a little more power. The dumb fist of politics now pushes aside the greedy little ‘invisible’ hand of Mr. Market. Subtle swindles give way to heavy-handed larceny.

Whatever happens, now the financial industry will have to stand in line for pat-downs and strip searches. More people of low intelligence and low self-esteem will find employment protecting the homeland’s financial security. And those who didst ride so high on Wall Street will lie in the dust of Congressional hearings… or lie low in some offshore hideaway. We take all that – as nasty as it is – for granted.

But the second part of the bunkum is probably dead wrong.

Government control of an economy has never led to stability or prosperity. In fact, the record is fairly clear – the more the state meddles, the worse the economic results.

In extreme cases, such as the Soviets’ 70-year experiment with a command economy, the results were so spectacularly bad that – at the end of it – Soviet industry had become ‘value subtracting.’ That is, it mobilized an entire economy to extract valuable resources… to ship them… to refine and process them… and to turn them into finished goods. And at the end of the day, the finished products were so badly made and so out-of-touch with what the market wanted that they were worth less than the resources that went into them!

No one is planning to recreate the Soviet system. Instead, they’re thinking that maybe a little political supervision would be a good thing. And who knows; maybe they’re right. We just don’t know of any theory or experience that leads us to think so.

But the fix is in and who are we to argue with it? Paulson is busily giving $700 billion of the taxpayers’ money away to his friends on Wall Street. The British are trying to save the City. And the French? What they don’t know about crony capitalism – at the public’s expense – is not worth knowing.

Source: The Bunkum Behind the Bounce