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THE
ROCKET SCHOOL OF ECONOMICS


Where To From Here?
by Professor von Braun

March 25th, 2000

What an amazing two weeks! As in absolutely, totally, unbelievably, amazing! The US stock indices (the DJIA is up 1676 points in two weeks) seem to power ahead regardless of the circumstances. But can this high-flying game continue? At this pace and at these over overvalued levels? Has the world gone mad? Has Sir Aldot Com lost the plot completely?

Lets put some things in perspective, probably a major and necessary requisite for maintaining, or trying to maintain, a sane viewpoint of where the US stock markets are at, since most value investors have had their sanity questioned some time ago any way.

We have a "bubble", no doubt about that. By any definition of historic prior markets that have gone before us, this is a bubble! Whether it be the Nikkei, the gold market of the early 80's, the oil market, 1929 all over again, the tulip craze, John Law's "Mississippi" bubble, or whatever, this is a bubble. That's BUBBLE!

Now what happens in the final stages of a fully-fledged "bubble" is, to some degree, anybody's guess. I know of several commentators who have called this market a bubble some time ago, who are reeling from the obviousness of their apparent wrong call.

But are they wrong?

No they are not! Too soon in their calls perhaps, yes! But regardless of that, this is a bubble the likes of which the world has never seen before. It -- the bubble --will end badly. They always do and this one, the current bubble, is no different. It is no different!

What we are seeing, in terms of rising indices on a worldwide basis, is the likes of a bubble that has never been seen before by the current generation of players that are involved in this activity. Most of them don't even know what a bubble is! Their attention span is related to that of a humming bird, intense but brief.

The "bubbleonians" have no idea that this could end badly. Badly is not a concept they understand. Which is not surprising since most of them don't have a recollection, as in something personally experienced, of what a bad ending is. Let's not forget that we are talking 1968 here, which was 32 years ago. Sure stocks traded flat for 14 years after that, but that's of no consequence since many of them were not even born at that time. Some of them remember 1987, but they also remember that the Fed fixed the problem by turning on the "liquidity" taps (a practice that continues to this day) and shortly thereafter, life continued in the same manner.

People who remember the years that followed the crash of 1929 are now hard to find. Actual experience of paper wealth disappearing in a matter of days is hard to find. The new age economic theorists have very few living arguments to point out the error of their ways.

Where the U.S. markets go from here in the short term is anybody's guess. Coming up next week is the end of the first quarter and one would expect mutual funds to indulge in the art of window dressing as we approach April 1st. The collective consciousness of the "bubbleonians" will assist also, as will the cheerleaders at CNBC & CNN.

We are witnessing the final stages of this particular bubble. Financial horror stories are already starting to appear, misplaced confidence levels are back at record highs, margin debt is continuing to rise and the party continues. Volatility has become the dominant theme.

Regardless of what appears in the popular press, this ship is taking on water, the captain is asleep at the wheel, the passengers are mostly inebriated, the officers are partying with the passengers, the crew has been sipping Russian vodka and the lifeboats are not up to standard.


The Prof can be contacted by email at profvonb2@aol.com

Copyright by Professor von Braun. All Rights Reserved. Reprinted at USAGOLD by permission.

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The Rocket School of Economics -- The Lecture Series Index

  • 22 May 2009 -- An Often Overlooked Issue!
  • 28 Mar 2009 -- Problematic Banking Systems!
  • 14 Nov 2008 -- What Exactly is an Asset?
  • 23 Aug 2008 -- Through the Looking Glass?
  • 02 Aug 2008 -- Compounding to the Downside!
  • 26 May 2008 -- Back to Basics Again!
  • 31 Mar 2008 -- The Broken Watch -- Part 2.
  • 27 Mar 2008 -- The Broken Watch -- Part 1.
  • 06 Feb 2008 -- The Financial Equivalent of Faulty Towers.
  • 10 Dec 2007 -- Monetary Systems & Productive Assets.
  • 14 Feb 2007 -- Divorced from Reality
  • 06 Sep 2006 -- Gold, Bankers, the Trade Deficit and Unsettled Transactions
  • 19 Jun 2006 -- When is a Reserve Not a Reserve?
  • 31 May 2006 -- The significance of August 15, 1971.
  • 08 Apr 2006 -- Keep Your Eye on the Ball!
  • 30 Mar 2006 -- What came first?
  • 11 Mar 2006 -- An Unanswered Question.
  • 08 Jan 2006 -- Where have all the projects gone!
  • 11 Dec 2005 -- Gorillas, Rising Gold Prices and Depreciating Paper Currencies!
  • 23 Oct 2005 -- Custodial Risk.
  • 16 Sep 2005 -- An Inherent Flaw.
  • 08 Aug 2005 -- Central Banks and 'Reserves'.
  • 31 Jul 2005 -- Central Bankers, Actors and 'We'.
  • 17 Jul 2005 -- Unintended Consequences! -- Part 3.
  • 07 Jul 2005 -- Unintended Consequences! -- Part 2.
  • 25 Jun 2005 -- Unintended Consequences! -- Part 1.
  • 14 Jun 2005 -- The Two Greater Fools Theory.
  • 03 Jun 2005 -- Real Money, Funny Money and YOU -- Part 4.
  • 30 May 2005 -- Real Money, Funny Money and YOU -- Part 3.
  • 26 May 2005 -- Real Money, Funny Money and YOU -- Part 2.
  • 21 May 2005 -- Real Money, Funny Money and YOU -- Part 1.
  • 09 Nov 2002 -- Carrying a Big Stick.
  • 17 Sep 2002 -- Wishful Thinking!
  • 27 Jul 2002 -- Gold Bugs Beware -- part 2.
  • 10 Jun 2002 -- Gold Bugs Beware!
  • 06 Apr 2002 -- Currencies versus Gold.
  • 26 Jan 2002 -- Bear Market Strategies.
  • 01 Jan 2002 -- 2002 -- A Perspective.
  • 20 Oct 2001 -- The Storm Clouds are Gathering.
  • 30 Sep 2001 -- What to Say?
  • 01 Jul 2001 -- ...Said the Fly to the Spider.
  • 14 Jun 2001 -- Upward and Downward!
  • 28 May 2001 -- Volatility Time, Again!
  • 14 May 2001 -- The Coming Bull Market in Gold Stocks?
  • 24 Feb 2001 -- High Hopes, Wishful Thinking & The Absurd
  • 20 Feb 2001 -- Who Put the Holes in the Swiss Cheese?
  • 22 Jan 2001 -- US Dollar Admits Identity Crisis!
  • 16 Jan 2001 -- Dear George W.
  • 24 Nov 2000 -- The Bubble Has Burst
  • 11 Nov 2000 -- The Media, Bull Markets & the Gold Price
  • 02 Nov 2000 -- Gold Stocks
  • 29 Oct 2000 -- Oh The Tangled Web We Weave ...When We Set Out to Deceive
  • 24 Oct 2000 -- A Mystery!
  • 16 Oct 2000 -- A Peso Here ...and a Few Thousand Pesos There
  • 10 Oct 2000 -- The Unfolding
  • 30 Sep 2000 -- What's Wrong with THIS Picture?
  • 25 Sep 2000 -- Buy Gold Now!!
  • 23 Sep 2000 -- The Times, They Are a' Changing
  • 15 Sep 2000 -- Time WILL Tell!
  • 27 Aug 2000 -- SS "Paper Assets" Begins to Take on Water
  • 06 Aug 2000 -- The Indian Summer
  • 26 Jun 2000 -- A Yellow Brick Wall
  • 22 May 2000 -- The King IS Naked
  • 30 Apr 2000 -- Goodbye Yellow Brick Road
  • 18 Apr 2000 -- Beware the Ides of March, April and May
  • 08 Apr 2000 -- Really, Sir Aldot!
  • 25 Mar 2000 -- Where To From Here?
  • 18 Mar 2000 -- The Gnomes of Zurich
  • 12 Mar 2000 -- The "New" Economy??
  • 06 Mar 2000 -- Two Questions
  • 04 Mar 2000 -- Iceberg Dead Ahead!
  • 28 Feb 2000 -- The Wizard of Oz
  • 06 Feb 2000 -- Here We Go Again!!
  • 15 Jan 2000 -- Comments on the Gold Market
  • 29 Dec 1999 -- No Raw Ingredients Required
  • 28 Dec 1999 -- No Way Out
  • 14 Dec 1999 -- Ho, Ho, Ho!
  • 07 Dec 1999 -- Greenspan's Bubble
  • 03 Dec 1999 -- Early Warning Signs


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