Talk about irrational exuberance! If yesterday's seismic eruption of giddiness on Wall Street had happened in, say, Kabul, we'd have seen Taliban revelers launching bottle rockets from the rooftops and dancing horas in the streets. We searched in vain for an explanation but found only a depressing report on June U.S. retail sales. We somehow doubt that the 2.7% drop reported by Macy's could have stirred up investors so and caused the Dow Industrials to surge to their biggest gain in years. What then? Our guess is that it was simply the 'Zimbabwe Factor' that we've mentioned here earlier operating at full strength. Recall that Zimbabwe, with an economy and life expectancy (34 years!) that rank as the absolute lowest in the world, has the hottest stock market, up fifty fold in the last twelve months. (Click on Arnold's bicep to enlarge) And so it goes here in the U.S., albeit on a far larger scale. With interest rates on the rise, our debt-glutted $12 trillion economy resembles nothing so much as a gargantuan Zimbabwe in the making. If so, who could blame Wall Street for a little premature celebration? After all, if there's going to be a Second Great Depression when $400 trillion of global debt de-leverages, as it absolutely must, why delay the celebration until the economy becomes so Zimbabwean that we won't be able to enjoy it? 50 Million Bad Bets Whatever it is that investors are so enthralled about remains a mystery to us. Could it be the deepening housing recession? The imminent collapse of consumer spending? The train wreck toward which debtors are racing while steeply rising real rates continue to eat away at micro economically fatal bets made by fifty million households? Could it be the increasing likelihood that oil will hit $100 a barrel?
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