Money Chasing Money
-- March 29, 2004

A "market on steroids" vividly describes what's happening to U.S. stocks, real estate, and bonds. Greenspan & Co. are proudly pumping up the money supply. But the result is that we're using debt to produce income, instead of saving and investing. We don't know when it ends, but we do know it ends badly.

Stocks are surging again today, as investors pour more fuel onto the fire. It's an example of why old hands in the market say it's dangerous to fight the tape, even though, in your bones, you might believe the rally cannot last.

The best single factoid we've seen to indicate that this move is built on money chasing money comes to us from Barron's: "Seven out of eight dollars General Motors made last year came from its finance operations, not making cars." What more needs to be said?

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