We've run out of bubbles

Booms and busts are natural to capitalism, but for years now an irresponsible Fed has interfered with the down cycle. The only choice now may be to let nature take its course.

By Bill Fleckenstein

Are the bulls in hibernation?

I'll begin the new year with this comment: There are no bullish interpretations for the stock market's action thus far. This tells us that 2008 will be the year when reality finally overtakes the Goldilocks crowd.

Of course, we should expect the bulls to regale us with stories about a proverbial second-half rebound -- the possibility of which is approximately zero, in my opinion. We should also expect believers in that hypothesis to spark a rally from time to time, based on hopes of surprise interest-rate cuts and on actual cuts.

But their efforts will become progressively less effective. (Anyone seeking a road map to how that might evolve can look at the market's responses to the rate cuts from 2000 through 2002.)

Irresponsible liquidity originally emanating from the Federal Reserve and then-chief Alan Greenspan (a subject I cover thoroughly in my soon-to-be-published book), coupled with reckless acts of deregulation, have created the problem we now face. The country has gone "all in" via the credit-bubble-inspired housing bubble, which is now unwinding.

http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/WeveRunOutOfBubbles.aspx?page=1

I'm dreaming dreams,
I'm scheming schemes, I'm building castles high.
They're born anew, their days are few,
Just like a sweet butterfly.
And as the daylight is dawning,
They come again in the morning!

I'm forever blowing bubbles,
Pretty bubbles in the air,
They fly so high,
Nearly reach the sky,
Then like my dreams
They fade and die.
Fortune's always hiding,
I've looked everywhere,
I'm forever blowing bubbles,
Pretty bubbles in the air.
When shadows creep,
When I'm asleep,
To lands of hope I stray!

Then at daybreak,
When I awake,
My bluebird flutters away..
"Happiness, you seem so near me,
Happiness, come forth and cheer me!"

I'm forever blowing bubbles,
Pretty bubbles in the air,
They fly so high,
Nearly reach the sky,
Then like my dreams
They fade and die.
Fortune's always hiding,
I've looked everywhere,
I'm forever blowing bubbles,
Pretty bubbles in the air.


- Jaan Kenbrovin


http://uk.youtube.com/watch?v=RDcPFxKhz14