Like all rally targets before it, our DJIA objective at 13587 gave way on Friday, inundated by a flood tide of buying that lifted the Indoos to yet one more all-time high. Paradoxically, and despite the market’s strength, the short I’d advised from 13587 would have been an easy winner, if only for little while, since our target came within a single tick of anticipating an intraday high that endured for more than five hours and which gave way to a correction of nearly 40 points.

Each time the bullish herd tramples logic itself as it did yet again on Friday, ignoring mounting evidence of a U.S economy whose deterioration is beginning to accelerate, we remind ourselves that Wall Street’s occasional flights of insanity can go on for quite a while longer than the disinterested observer might expect or even imagine. I might have assumed I’d seen enough in 35 years of market-watching to prepare me for the Krakatoa of delusion that we are witnessing today. There was casino-stock mania in the late 1970s, and the amazing short-squeeze in UAL when it operated hotels as Allegis Corp. in the 1980s. I watched a friend on the options floor lose his entire net worth resisting Nike’s unlikely success transforming the lowly sneaker into an object of worship. And now,  Apple shares, propelled by the same quasi-religious devotion, are approaching similar levels of absurdity.

Money Is Cheap

Yet, none of this prepared me for the Bull Market of 2007, with its Babel-onian ascent into the heavens, even as a credit-glutted economy teeters on the brink of the steepest recessionary cliff since 1973-74. How could investors be so foolish?  The answer, very simply, is that there is practically no limit these days to the amount of money that can be borrowed for financial speculation.  Money is so incredibly cheap, in fact, that even the savviest leverageurs are leaping to pay billions for companies like Chrysler Corp. and the L.A. Times that face extinction.  After all, what have these swashbuckling financiers got to lose, given that their grubstake consists almost entirely of Other People’s Money?

Meanwhile, wealthy investors who were once content to let hedge funds do their speculating for them have been piling into private-equity deals like there’ll be no tomorrow, leveraging minuscule downpayments to buy entire companies rather than mere stocks.  This Ponzi game took $179 billion worth of S&P Index shares out of play last year – enough to skew the supply and demand for stock sufficiently to boost the broad averages no matter what the state of the economy.

Too Many Zeroes

Obviously the revelry cannot continue forever, even if we lack the imagination to see when and how it might end. We are witnessing nothing less than Tulipmania on a global scale, and trying to reckon the looming catastrophe in dollar terms requires visualizing a string of zeros that stretches beyond human understanding and experience. But even if we cannot know what the future holds, we sense deeply in our bones that this epochal swelling of folly and greed cannot end other than badly