The Stock & Bond Markets -
"Today, a megayacht [as long as 550 feet] is indispensable, not like 15 years ago when a yacht was a luxury item" according to the head of yacht financing at Dutch bank ING. This is one of the most intriguing quotes I've heard in my 27 years of investment management. "Indispensible" to who (whom?). It makes American splurges on $1,000 flat screens or $400 iPods seem prudent. At the Monaco Yacht Show, the latest must have onboard items (in addition to the indispensable megayacht) are $2 million helicopters and $250,000 minisubs. The reason I mention this (there's a point?) is that I just returned from Monaco (and St. Tropez) on my honeymoon and couldn't believe the wealth on display with 500 square foot, non-ocean view studios selling for over $1,000,000. And with the dollar at a record low, there were ads for U.S. real estate in the Riviera Times encouraging the European jet set to buy on the coast here due to currency strength and 30%+ decreases in many beach communities. There's lots of wealth so, despite the seemingly infinite amount of conflicting data about the strength of the U.S. economy, there are other economies doing exceedingly well who might well see our stock and real estate markets as undervalued and provide more demand to support the current record prices in the S&P 500 and NASDAQ. Stay tuned.

The U.S. Treasury bond market continued to rally in September but almost 75% of 30 bond managers of overseeing $1.25 trillion (that's TRILLION) expect a hedge fund or credit market blowup in the near future. While most believe the worst of the "subprime" crisis has ended, they also believe the Federal Reserve has failed to restore confidence in the U.S. credit markets despite the recent discount rate cut and that fundamentals have gotten worse, not better.

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Real Estate Bubble? -
According to former Federal Reserve Chairman Alan Greenspan, "we have a long way to go before residential and mortgage markets stabilize." He went on to add that "recent declines in home prices are already eating into home equities [and that] comsumer spending and DDP will be under pressure from declining household wealth." Not too encouraging nor was the latest housing data indicating the biggest drop in median home prices in almost 30 years (December 1970 to be exact). Pending home sales fell 6.5% in August following a 10.7% decline in July making the 2 month decline over 17%, the largest decline in that indexes history. Perhaps the ads soliciting European buyers (see above) to take advantage of their record currency strength and the declining prices here will result in sales to cushion the price realities many are facing here.