All thinking investors and their dogs have some bad days when they experience fear or even terror about the eventual outcome of Professor Bernanke’s vast monetary experiment. They tremble at the realization that his mega money printing and manipulation of long-term interest rates are powering waves of irrational exuberance.
These waves are populated by a growing number of investors who out of desperation for real yield put on rose-coloured spectacles which filter out risks and magnify expected returns. Yet principle and past suggest that at some point when the gap between actual reality and the vision through the rose-coloured spectacles becomes very large, then the lenses splinter. That is when irrational exuberance turns into depression and the economy falls into a severe recession. Only fools believe any precise forecast as to when that point will occur.
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