On The Other Hand

The Reuters article points out the fear surrounding the amazing gains in the equities market with the DOW rapidly approaching 10,000. Is this thing going to hold or will it fall apart.

The fear is based on several components that we have been looking at for a while now.

Inter bank interest rates are flat, i.e. money is cheap. The problem here is that its not easy to gauge the truth of this rally while money is cheap. Is it real or is it a rally on steroids.

Some banks are now TBTF - too big to fail - and this is a scary prospect. We are at their mercy.

The housing market still has serious problems. There is a glut of vacant units and housing prices have not recovered. Millions of residential and commercial foreclosures are still coming.

The finishing blow is unemployment. We've looked at this from many points of view, the impact is extensive to say the least.

Reuters: Wall Street risks red October as rebound looks frothy

Unusual simultaneous rallies in equities, U.S. government bonds and commodities are linked to one factor: super-cheap monetary policies adopted around the world.

Joseph Stiglitz, a prominent economist and Nobel Laureate from Columbia University in New York, argued last week that the U.S. banking sector is now in worse shape than before the collapse of major investment bank Lehman Brothers in September 2008, because banks seen as too big to fail before the crisis had grown even larger.

The average time people are left without a job has also grown and is now close to 6 months, the highest on record.