Gary Tanashian submits: Where I am confused (but working each day to understand) is in the stock market's daily grind upward and in my daily life as the owner of a company that is a tiny link in the chain of the US manufacturing economy.
Business could not be better for us at the moment, although there are annoyances like supplier cost increases (lagging indicator of inflation) in the system. Contrary to what the always-bearish writers imply, I refuse to blame FrankeMarket's relentless march higher on any of the standard excuses (Bush, Paulson, Bernanke remote control.....Da Boyz in the futures pit, etc.). Also, the market does not have the feel of being fueled simply by short covering. The rally has sustained too well for that to be the lone driver. I simply believe that it is forecasting that the world is not going to end economically any time soon.
But......I also believe, as I have since this website was formed, that the source of this activity is the lingering effects of Mr. Greenspan's panic move on the liquidity spigot and that pure, bald faced inflation policy has now been enhanced by the myriad investment and trading vehicles, black boxes and mini-manias that have become a standard part of the financial world's landscape. These games create and play carry trades wherever they can find them and keep the worthless Dollars, Euros and Yen moving......into financial assets. Interestingly, two of those benefiting asset classes appear to be US manufacturing firms and commercial real estate based on my own personal experience.
This is why I have written about risk vs. reward: as the potential rewards increase, so does the risk in a financial system hopped up and levered to the max with debt and the assumption that the music will never stop. I always manage risk. It is as simple as that. Hence, I don't care if gold goes back to $300, there will always be a place for it in my portfolio. I have never cared for gambling. It is not fun for me. Making and preserving capital is huge fun for me.