Submitted by Charles Hugh-Smith of OfTwoMinds blog,
The stock market's wild swings of sentiment have got me thinking it's living on reds, vitamin C and cocaine. This is a famous line from the Grateful Dead song Truckin'.
I've marked up a one-month chart of the S&P 500 (SPX) to illustrate what I mean:
Reds are slang for barbiturates, a class of depressants/sedatives (downers). Cocaine induces euphoric highs in which the cokehead feels he possesses god-like powers--for example, he might imagine he is a Federal Reserve member, or even its chairperson.
There are multiple interpretations of the role of vitamin C in the lyric, but for the purposes of the chart it serves as a modest dose of something healthy to keep the drug-ravaged market from crashing.
After multiple swings between cocaine highs brought to earth by downers, the market seems to be tripping on acid again. Though no one can know precisely what hallucinations are spinning through the manic-depressive sentiment of the market, it seems the market has responded to the withdrawal of its free-money cocaine--supplied of course by the Federal Reserve--by entering a drug-induced fantasy that everything's been fixed in the global economy: Europe is growing again, China's housing crisis has passed, U.S. corporate profits will feed corporate buybacks forever, and so stocks can loft higher again--a Bull Market without end.This state of delusion would be amusing if it wasn't so tragic. The acid will wear off soon enough, and a mega-dose of vitamin C will not be enough to restore the shattered health of a manic, drugged-out market careening between euphoria and fear.