Everybody on the bearish discussion boards I read, it seems, blames the government for screwing up the markets by intervening - buying futures, etc. (I find it amusing that many of these same folks then want the same government to intervene in the healthcare system and so forth, because obviously markets can’t handle that). Personally, other than the bumbling Fed’s interest rate manipulations, I do not think that there is any government intervention in the stock market. The recent Bear Stearns debacle serves to illuminate the general lack of understanding and overall stupidity on Wall Street. All they know is that leverage has been working and the solution to any problem is to “do more”. So they just keep pumping, adding more and more assets and the corresponding leverage. The record highs on Google serve to illustrate the willingness of the investing public to do the same thing, speculating that there is always a Future Bagholder to take them out at a higher price.

There was a foreclosure auction in the Bay Area over the weekend, complete with young female cheerleaders and a guy doing the chicken dance encouraging bidders. I am not making this up, it’s in the Chronicle. Also many quotes from winning bidders - seemingly all speculators who bid much more than they had planned, presumably dazzled by the young ladies. The naivete and idiocy exhibited was just mind-boggling. I mean, I can somewhat understand chasing a momentum mania although not well enough to do it myself. But trying to catch an obvious falling knife is really dumb, considering the lack of liquidity and enormous use of leverage in real estate.

The widespread complacency and general lack of, shall we say, intellectual competence, is most likely leading to a nasty accident. Beware. I know I’ve said it before. Well, I’m saying it again. Just because the Tartars haven’t come yet doesn’t mean they’re not coming (see “The Black Swan”).