Waiting for the Fed

There are some in the world today who think that the man you see below is already meeting with great success in mopping up after the last asset bubble (in housing), a process that, by definition, involves the creation of a new, even bigger asset bubble (in stocks) to take everyone's mind off of the deleterious affects of the prior one.
How else do you explain the meteoric rise in share prices when just about everything else is either still going down or rising at pedestrian rates?

Colin Barr, senior writer at Fortune magazine, is apparently one of those people, a point that should become quite clear after a quick look at this commentary.

"This is the most speculative momentum-driven equity market since the early 1930s," Gluskin Sheff economist David Rosenberg wrote in a note to clients Monday.

Of course, stocks have rallied in part because investors perceive the worst-case scenario -- a 1930s-style Depression -- is off the table. And while the gains have been remarkable, they come after an even bigger decline. The S&P is still down 16% since Lehman Brothers collapsed in September.

But while most people take the rise in stocks as a hopeful sign for the economy, some see evidence that the Fed has been financing a speculative mania that could end in another damaging rout.

Recent weeks have brought huge rallies in some of the lowest-quality stocks -- including firms such as AIG, Fannie Mae and Freddie Mac that are being propped up by the government and are unlikely to return to health any time soon.

What's more, this year has brought an 80% surge in emerging market stocks, while the dollar has posted a 10% decline since March. A declining dollar and surging emerging markets were the hallmarks of the credit-fueled bull run earlier this decade.

The Fed policy statement will be released in about an hour, at which time the central bank is not likely to provide any indication as to whether or not it thinks it is succeeding in taking everyone's mind off of the last, spent asset bubble by inflating a new one.