The Bubble, part two: Reloaded

Not that most readers of this humble web log are wealthy enough (anymore, at any rate) to be investors, but just in case you were thinking of putting your hard-earned cash on the roulette wheel otherwise known as the stock market, I urge you to think again.

The irrational exuberance that swept the investment world in the mid-to-late 90’s is back, albeit in a slightly different shade of greed. Meager positive “signs” from formerly obscure indicators are now being touted by the markets’ public relations squad (fund managers and brokerage houses) as sure evidence that an economic recovery is ‘under way’ and that the greatest risk today is to have your ‘money off the table’ because you’ll be ‘too late to get in.’

This is the shell game. For those of you who are too young to remember how this works: when the people on TV are telling you to buy, it’s because they want to sell. When the people on TV are telling you to sell, it’s because they want to buy.

Trading by insiders (the people who run the big companies) has been about 80% on the sell side. This means that the people running the companies think that current prices are high enough for them to sell their stakes in the companies they own. They are using the opportunity afforded by the Bush administration’s optimistic economic language to get out of the market.

If you think America may have been fooled into a war, into electing Bush, into approving a tax-cut for the rich, or into letting the vast majority of executives who cheated America off the hook, then you should also question the heady, unsubstantiated optimism of Wall Street this month.

The worst thing that can happen to you is not that you’ll miss out on winnings. It’s that you’ll lose whatever it is you have left.