The latest Barron’s has run a good article against an obvious oil bubble, which is really worth reading. By reaching $135 a barrel from $20ish in 2000, just 8 years ago, the trajectory of oil prices looks very similar to the Nasdaq’s eight-year run to a peak of more than 5,000 in March 2000. Today, Nasdaq sits on ~2,400. Most believe that the hike of oil prices, up 40% simply this year, doesn’t reflects fundamental changes in supply and demand caused by the economy, but by some other factors.

Not surprisingly at all, the biggest hoarders are always the governments across the world.

Last Tuesday night, Robin Li, CEO of Baidu.com (BIDU), came and shared with us the Baidu story. At the beginning of the event, led by Qi Lu, Executive Vice President of Yahoo and President of HYSTA, we had a special moment dedicated to these deeply affected by China earthquake that devastated thousands of people in Sichuan Province, China.

Baidu.com, as the No.1 web site in China, has acted quickly, helping people save lives and donate for quake victims. The same night, along with a 2 million RMB donation, Robin urged the company to use its unbelievable penetration, including millions of Chinese web surfers and thousands of affiliates, to help those devastated by the quake. One amazing story was about a female student, Qi Zhang, who helped military find the best helicopter landing spot near the epicenter by posting online. It simply reflects how the Internet is shaping China and how Baidu is riding the China Internet dragon better than ever.

In my last week’s post, I cited the article, “On the brink of disaster," from Fortune:

Bear (BSC) had about $13 trillion of derivatives deals with counterparties, according to its most recent financial filings. If Bear had croaked, large parts of the world could have croaked. And the economic damage could have been catastrophic.

Finally, Fortune magazine came up with a slew of articles revealing the myths behind the Bernanke Fed's recent moves regarding the Bear Stearns' (BSC) bailout and providing in-depth analysis on this credit crunch.

The first article, The last days of Bear Stearns, provides a timetable of the Bear Stearns meltdown in great details: On the afternoon of March 7, a major bank had rebuffed Bear’s request for a short-term $2 billion loan. On March 10, the firm had $17 billion in cash. The following day, another blow came from Goldman (GS) by stepping in for institutions nervous on Bear derivatives deals via an email to its customers. With the email leaked the next day, the floodgates opened. March 13, CEO Schwartz contacted J.P. Morgan (JPM) CEO Jamie Dimon in the evening with Bear facing bankruptcy. At that moment, Bear only had $2 billion cash.

The wrongdoings from the financial system give us a perfect target to blame. However, that’s only part of the story.

The current economic booming is driven by both the housing market and durable goods. In economics, a durable good or a hard good is a good which does not quickly wear out, or more specifically, it yields services or utility over time rather than being completely used up when used once. In some degree, houses could also be treated as a durable good. These are not things that people will buy as often as clothings and food. Eventually, durable goods will reach a saturation stage that is bound by a country’s population, or more specifically, is bound by the size of a country’s workforce. At this time, even without a real estate bubble, the economy will still slow down. The current economic growth model would only sustain if we have an expanding workforce. Unfortunately, we have an opposite situation here in the US.

The Bear Stearns (BSC) bailout has spurred a lot of healthy debates. One side believes that the Fed’s intervention is to bail out the Wall Street and is causing more troubles down the road , or, worse, is because of a century old conspiracy, while the other side believes that the Fed is not bailing out Bear Stearns , or is doing the right thing to prevent further issues, such as deflationary risk . Of course, there are people sitting on the sideline, pointing out that, in the long run, if the Fed is betting on the right direction, the Bear Stearn move actually brings in money for the government and it might start a new era, putting security firms’ regulation in Fed’s hands .

The reason for government’s intervention, as Treasury Secretary Hank Paulson put it:

Economic bubbles start with a shining story and end with a tragedy, which keeps reminding people that nothing can be overdone. Surprisingly, bubbles are built on top of solid fundamentals. Once people believe in them, people start to over-leverage them until, of course, the situation becomes so extreme that everything is afloat, detached from their roots. This real estate bubble is no difference.

It is normal that low interest rate will energize house purchases, and consequently, jack up the price. However, it should be bound by debt-to-income ratio. Further, it is also bound by available liquidity. Creatively, “smart” people in financial system built up models based on historic data analysis, proving that house price will keep going up in the foreseeable future.