Thursday, November 12, 2009

It's Bubble Time

Here we go again:

In the last eight months, the Dow Jones Industrial Average has risen from its March 6 low of 6470 to over 10290 today, a gain of roughly 59%. The Nasdaq Composite Index and the S&P 500 Index have likewise increased about 71% and 65%, respectively, since early March. Are we looking at the restoration of legitimate values or the emergence of disastrous new asset price bubbles?

The answer would seem to lie in whether the Fed's money machine is fueling an illusory recovery that is only manifested in financial markets as opposed to the general economy. The FOMC's own report acknowledges that economic activity remains weak, household spending is constrained, and businesses are still cutting back on fixed investment and staffing.

The Fed's 0% interest loans to banks are contributing to yet another massive bubble, though instead of real estate, this time its the stock market.

The game is rigged to blow, get out while you can.

[via WSJ]

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