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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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From: UncleBigs	12/9/2005 12:01:18 PM
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Gold's parabolic price rise is similar to many other asset price spikes we've seen. I don't think it's a sign of imminent collapse of the world financial system. The appetite for risk is insatiable right now. Once an asset's price becomes in motion, hedge funds and the public pile on for the ride. The herd has been right for so long that it's an easy money trade to jump on the bandwagon of any asset that recently made a new high. New highs continue on and on until they cool and then the hot money goes in search of the next bubble. It seems that the tighter liquidity becomes, the greater the appetite for risk. While it seems counter intuitive, I think it's similar to the Heroin addict's behavior. When the Heroin addict is withdrawing from the drug, I think he becomes so desperate for the fix he's willing to do anything including robbing banks if necessary. I view this as a last gasp risk embrace. I think a collapse in asset prices is just around the corner unless Dr. Bernanke (Kervorkian?) comes on the scene with more drug. Next week's Fed meeting will be disappointing to markets I believe. I think they raise a quarter and keep language the same.

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