Even though I was a consistent B student in economics, I still find the topic fascinating.  And I’m always good for a quick read on the markets and the current malaise.  While I find Mish to be a "tad" more pessimistic than me, I did find today’s afternoon post to be interesting.

A few things seem pretty apparent to me:

  • Banks are capital impaired because it would be stupid for an investor to provide said liquidity at current interest rates that probably don’t beat inflation, which means that
  • Interest rates are lower than they should be, which means that
  • Interest rates have to rise to attract investor $$$ as capital needs get more intense over time, which means that
  • There is no way in hell we’re in the 8th inning of the current crisis as some have suggested.

The only question is, where is investor money going to go in the interim?  Bonds, commodities, equities, and even emerging markets are all either richly valued or highly suspect in the current environment.

I have speculated for about a year now that we are due for an echo boom in tech around the new technologies (web 2.0 & beyond as well as cleantech), and my good friend Christopher Griffin corroborates that may just be the case when he says that the top VCs aren’t having any trouble raising money (see paragraph 2).  But the fact remains that, like them or not, bubbles are formed by the masses moving investment $$$ in new areas… and money has never been as portable as it is today.

Is it just the nature of investing today that everyone is looking for an edge, so bubbles are inevitable?  It sure seems to be the case to me.

Just my two cents.  Back to work.