Irrational Exuberance

When the Dow was at 14,300, a 10% correction would seem necessary, at the least. The markets fell over the past month, getting as low as 12,800. While a setback for some, this was movement in the right direction for the economy as a whole. Many financial indicators: Housing (home sales, subprime issues, etc.), crude oil prices (NOTE: Saudi Arabia is currently the only OPEC member with excess capacity. Remember your Econ 101?), and the global valuation of the US dollar seem to imply that a draw down in the economy is not only coming but is inevitable. First consider that the Stock Market is not the economy but a single measure of its health. After the "correction", the Dow is now almost back to pre-drop levels, in the course of a week. Allan Greenspan's famous phrase seems to capture this fluctuation precisely. This should be taken to heart as the larger economic issues begin to surface as a result of not only the stock market's "irrational exuberance" but also that of the recent "era of cheap capital" of which subprime is only the tip of the iceberg.