During bubbles, we cynical/discerning/skeptical folks increasingly have one thought dashing through our swelling, itchy brains as we watch those participating in the party: "This doesn't make sense. Something is wrong with them."
And the bubble gets bigger. "This doesn't make sense. Something is wrong with them." We stand outside the window, staring inside, and the party just gets more fun. More booze is carted in. Strippers show up. People are hanging off chandeliers.
"This doesn't make sense. Something is wrong with them."
And, after a certain amount of time, depending on the observer, there is a shift: "This doesn't make sense. Something is wrong with me."
At this point, a decision has to be made. The observer decides he is wrong, steps away from the window, and goes inside to join the party; or the observer accepts that perhaps there is something wrong with him, but logic still forecloses him from walking inside.
What happens once this crossing takes place? Who knows. Maybe the party goes on for a while longer. Maybe the observer has such rotten timing that, after he's missed all the fun, everyone dancing around nude suddenly contracts syphilis the moment he walks in the door.
I have felt myself at this crossroads lately, particularly as every other bear on the web has given up any hope of a big downturn and the most dramatic drop is maybe a few percent. I know that our friends in Gainesville have offered three (!) different scenarios for what's next, including, almost as a postscript, the remote chance of a big drop, but I think that's in there just as an insurance policy for future marketing efforts.
The fact is, the bears have given up. Period. Every one of them. Believe me, because they send me emails about their views, and they've thrown in the towel.
This came to mind over the past 24 hours because of what's happening in Ireland. The Irish finally gave up, accepting the fact their economy is a total basket case, and went for a bailout. The market's reaction, naturally, was to rally boldly on the news. All asset classes zoomed skyward.
So what's accepted for fantastic news these days is an important industrialized country affirming that it's in financial ruins and accepting the 2,387th giant bailout package to forestall the inevitable.
And that's when the thought appears: "This doesn't make sense. Something is wrong with me."
When I woke up this morning – far too early, as usual – I glanced at my iPad, and I was surprised to see that not only had the huge Euro and ES gains vanished, but they were now losers. As I'm typing this, the ES is down five points – a 12+ point reversal from just hours ago.
It will be interesting to see where this party eventually winds up. I'm still betting on syphilis.
