Absent alcohol (private equity-put), party back on

Today’s action was as wild as seen in recent memory; partly due to Cisco’s (CSCO) John Chambers helping the most delusional among us to extrapolate his personal thoughts on the economy, “the strongest he’s ever seen,” to that of the same for the entire universe of stocks. Never mind that Chambers was also quite exuberant on or around March of 2000 based on quotes you can easily find by doing a Google search. Regardless, stocks shot out of the gate this morning; powered even higher by around 2:30 PM EST in the U.S. (Dow up over 160-points and Nasdaq up 64-points) and then surrendered all of the Dow gains and nearly half of the Nasdaq gains by 3:30 PM EST before regaining nearly every point by the close of trading. This is the same market many of your parents and grandparents might be riding into retirement. It was just the furthest from any semblance of normalcy one could imagine. But a big gain is a big gain as far as the bulls are concerned. Yea, excess and speculation has been wrung out of the system. Knowing what we know now versus just three weeks ago when “liquidity” and private-equity were all the bulls needed to know in order to assemble a retirement plan the logic of for S&P 500 and the Dow Jones Industrials to be resting roughly 3-percent from their respective all-time highs is simply the height of folly. Regardless of this lightning speed rebound of nearly 3/5ths of the prior three week’s sell-off, in essentially three trading days, it eludes the delsusionists that the horse we rode into calendar year 2007 may not be dead, but its pretty well maimed. Again, either this is a resounding display of resiliency or one of the most acute cases of collective delusion witnessed in the annals of modern finance. I suspect it’s the latter. But time will tell. To wit: Research In Motion (RIMM), is back within 2.9% of its all-time high today; Fannie Mae (FNM), in midst of the scariest mortgage crisis in decades, was within 3-percent of its highest level last seen in January 2005, even before the most delusional of bulls had even an inkling of what an absurd and distorted bubble had formed in housing--which probably did not even peak until later that summer; Applied Material (AMAT) traded within 9-cents of its 52-week high today and its highest price since April 2004. Are we really on the cusp of a dramatic pick-up in economic activity that might be the driver for businesses wanting to ramp-up capital investment compared to the horizon ahead of us in April 2004? Same for Cypress Semi (CY), seeing its highest price since August 2001. Also, somewhat noteworthy was China’s counter punch to Hank Paulson’s urging that they be more like those cuddly benevolent Yankees. They quickly obliged by reminding the U.S. Treasury Secretary that they probably held the card that would trigger the collapse of the dollar given its cache of $1.3-trillion of U.S Treasuries.