Irrational Exuberance -- Take 2

Where is Greenspan when you need him? What is going on now in the stock market is sheer giddiness. It is the hot and cold, up and down phenomena that has characterized the market over the last months. The new highs suggest only that everyone wants to forget that a week or ten days ago we were all forecasting rampant inflation and almost-certain recession. We are working ourselves into a froth and smack into a bubble – a bubble in the whole market.

Where is Greenspan when you need him?  What is going on now in the stock market is sheer giddiness.  It is the hot and cold, up and down phenomena that has characterized the market over the last months.  The new highs suggest only that everyone wants to forget that a week or ten days ago we were all forecasting rampant inflation and almost-certain recession.  We are working ourselves into a froth and smack into a bubble – a bubble in the whole market.

 

I know the third quarter earnings have been better than expected.   I know the 50 basis point drop has been encouraging.  I know that a weaker dollar helps with exports.  But, come on now.  Things are not all that rosy.  The credit problem has not even begun to work itself out and inflation is every bit as real as it was last week.  And, these are only some of the persistent problems plaguing the economy.  My point is, simply, that the market movers are in a frenzy and sucking in many other investors – sucking into a party that will implode.

 

There are few cool heads right now.  It is time to run for cover (puts).

 

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Comments

  • Carey Richardson

    October 12, 2007

    It is all about investor sentiment and psychology. As the market fell today, everybody was trying to find the reason why it went down. The truth is that the market has been so strong that it didn't even require a catalyst for sentiment to get undermined. Today may have been a turning point.

  • jonathan

    October 12, 2007

    Who do you know, Art. Just after you posted this, the market tanked. I too think this is the turning point, even though the day ended less dramatically. Maybe tomorrow will be something else. I hope not, but I have that feeling.

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