Specu-elation - Investors are bidding up stocks, gold, and oil to dizzying heights. It's déja vu..

Specu-elation, much like masturbation, is a substitute for the real thing.
It's the definition of Wall Street.


The Dow, shown climbing toward the 10,000 mark on Oct. 14, 2009
By Rana Foroohar | NEWSWEEK
Published Oct 30, 2009
From the magazine issue dated Nov 9, 2009


Boom and Gloom
Investors are bidding up stocks, gold, and oil to dizzying heights. It's déja vu all over again.

For the past several months, investors have been acting like it's 1999, the first year when the Dow crossed 10,000, and stocks took off in complete disregard for reality. Yet the atmosphere then and now couldn't be more different. Back then, stocks were frothier than real businesses, no doubt. But today, American job prospects are the worst in a generation, many state governments are near bankruptcy, consumer credit has all but dried up in the developed world--and global investors see all this as a good sign? It's tough to find an asset class that isn't up, often way up: since the March lows, the S&P has risen by 58 percent; the NASDAQ is up 67 percent. Emerging markets (as measured by the MSCI index) have soared 95 percent. Commodities of all kinds are rising, with crude oil up 132 percent from its February lows and gold hovering around record highs. Although rumblings over banking regulation in Washington last week triggered a dip in financial stocks, the very firms that caused the financial crisis are still leading the industry league standings, up an eye-popping 126 percent since March.

Where is Robert Shiller (the bestselling author of Irrational Exuberance) when you need him? In fact, the Yale professor, who accurately foretold the crash of 2001, has just finished tallying the latest Case-Shiller index of top U.S. housing markets, which shows that home prices fell 7.2 percent between December and April, before rising 5 percent between April and August. While historical gaps in data make it tough to track perfectly, Shiller believes we have just seen the sharpest turnaround in American house prices in a century. British and Australian markets are starting to swing up, too, and in many Asian cities, real estate is positively buoyant. How is it possible that home prices are going up again even as employment is going down in most parts of the world, wage growth is nonexistent, and public debt levels are reaching record highs? "We've just gotten very speculative in our behavior, and it's a change that will likely last. I'm inclined to say that we're seeing a new bubble," says Shiller.

Or, more accurately, an echo bubble. It's a term economists use to describe the smaller bubbles that follow on the heels of major ones, usually after the authorities helicopter in loads of cash to patch up the first round of damage, setting the stage for a second round of easy-money-driven speculation. The phenomenon has been observed throughout history, from the British railway bubble of 1830 to the Saudi stock bubble of 2005. Edward Chancellor, author of Devil Take the Hindmost: A History of Financial Speculation, says, "Echo bubbles tend to be smaller and fade away faster than the first bubble." On average, they reach about 30 to 40 percent of the size of the original before bursting and sending market values back down to where they should have been all along, wiping out the gains of the echo, but generally not dipping back to the previous low. That implies a Dow falling to 7000 or 8000.

While new bubbles tend to build on entirely new market fads, echo bubbles generally retrace old territory. It's no accident that today's biggest price spikes are in assets like commodities (which peaked in 2008) and emerging markets (late-2007 peak). "The story of endless global growth, now driven by China and other key emerging markets, is a dream that dies hard," notes Ruchir Sharma, head of emerging markets for Morgan Stanley Investment Management.

The dream ignores the fact that global markets have yet to recover full health after the near-fatal heart attack in credit markets last fall. "Too many investors are treating the financial crisis as though it were a flesh wound," notes PIMCO CEO Mohamed El-Erian. "It's not: the system has been shaken not at the periphery but at the core," he adds, the core being the U.S. financial system.

...cont'd


http://www.newsweek.com/id/220402



Not to mention the dollar's demise as an exchange currency for oil/gas. Prices for crude aren't 'up' so much as the dollar is DOWN.

3 ozs of gold last Friday and it dropped $25. right afterwards.
When everyone else is buying, SELL. When everyone else is selling, BUY. This has been working out great for me.

Haven't you heard?

Dubai is probably going to get a bail-out.

The partying, Speculating, Manipulation, and Criminal Ponzi Scheme will continue until it can't.

And for the most part, The American People are willing to be totally bankrupted and destroyed by it.

Because the lie is so much more fun than the reality.

The Con is just too Cool to let go.

Viva Recovery!

:crazy:

the worlds reserve currency to fuel the next carry trade is not going to end well. in years past it was the yen that fueled the carry trade and we can all see what a boon that was to the Japanese economy!!! the dollar carry is fueling an asset bubble in equities and this bubble, like all bubbles before it WILL burst and when it does it wont be pretty...........