This state of delusion would be amusing if it wasn't so tragic.
The stock market's wild swings of sentiment have got me thinking that it's living on reds, vitamin C and cocaine -- that famous line from the Grateful Dead song Truckin'.
I've marked up a one-month chart of the S&P 500 to illustrate what I mean:
'Reds' is slang for barbiturates, a class of depressants/sedatives (downers). Cocaine induces euphoric highs in which the user 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 it 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, which means that stocks will loft even higher -- a bull market without end.
This state of delusion would be amusing if it wasn't so tragic. The drugs will soon wear off and a mega-dose of vitamin C will do little to restore the shattered health of a manic, drugged-out market careening between euphoria and fear.