30 Apr 2008

Faith, Money, Greed, Bubbles, Karma and Despair

The Reuters headline says it all: "Fed tone may send food and gasoline prices higher". See? It's not the economic realities that drive the interest rate cut, it's the tone of those who deliver it that's the problem. Talk about shooting the messenger.
The increases in food and fuel costs have triggered protests around the globe.

"There had been so much hope that they would say something that would give us some sort of indication that they were done with this insanity," said Peter Beutel, president of Cameron Hanover.
So what do US fund managers like Peter Beutel do in this climate of fear and uncertainty? Do they tuck their heads in and promise to take a more responsible stance in future deals? No, they look for a new opportunity to exploit. And the new buzzwords are "Emerging Markets" even though analysts admit such investments are already over-priced:
"This bubble, like all bubbles, will not be justified by long-term value but at least will be one of the least flaky bubble cases ever," Grantham, chairman of fund manager GMO, wrote in a note to clients.

"Perhaps once in a career any self respecting strategist, even a one trick "mean reversion" one like GMO, should have a go at predicting a major divergence, a true bubble. And this is ours."
And when that bubble pops, it will be all the Fed's fault too.