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Bubbles, Bubbles Everywhere



October 08, 2009 – Comments (1)

Watching the price of commodities this week was like watching a sci fi movie satire "Attack of the Bubble People".

MTLQQ.PK has a market cap of half a $B, FRE is around one $B, and FNM has like one and a half $B. Don't people know that the objective value of these things is about $0.00?

Yeah, a weak dollar and the Fed is printing money like mad. If the economy comes roaring back and Bernanke misses the mark, inflation could return, but this won't happen for like a couple of years. Right now, the US GNP is deflating, which should lead to low prices, not gold at record levels pushing $1,100 an oz.

OK, weak dollar, but how do you figure $70 a bbl? World wide output is decreasing along with oil consumption. US stocks are at record levels, besides being right in the middle of a depression.

Stocks sure seem to have overrun their headlights. 3rd Qtr PE (using operating earnings) for the S&P 500 is estimated to be around 27. The average for the past decade is in the low 20's. In the aftermath of the tech bubble, it was in the high teens. The only way 27 is justified is if earnings explode like that guy's head in Scanners. This does not seem to be in the cards.

I am getting a queasy feeling about all this.


1 Comments – Post Your Own

#1) On October 08, 2009 at 9:29 PM, vkob (< 20) wrote:

You read my mind... If this irrational exuberance doesn't gradually wind down to something realistic, the savage over-reation the markets are sure to make will lead us into a double dip...

 But... if the 6-12 month outlook is as rosey as the market is assuming (because people forget it's not all about the now) maybe we'll be ok. But I don't think so :-(

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