Sometimes a bizarre event seems to capture the madness of the times, and this news a href=”http://www.bloomberg.com/apps/news?pid=20601101amp;sid=ayy1QKcwcGN0″span style=”color:#cc0000;”from Bloomberg/span /afits the bill. strongemA couple of Asians carrying Japanese passports have been arrested by Italian border police with a trunk load of non-negotiable US bearer bonds to the value of $134bn./em/strong It’s not as crazy as it sounds. The Fed did actually issue bearer bonds up to the value of $500m each until the late 1960’s (when electronic record keeping superseded them), and these look on initial examination like the genuine article. If they are real, they could only have come from a handful of countries with sufficient dollar reserves to have accumulated such a huge sum, notably China and Japan. If they are fakes, it would be the biggest such operation in history, and would almost certainly imply state involvement, with North Korea the prime suspect. Either way, even in …

Having called for a ferocious rally from extreme oversold conditions in equities back in March, my current caution on the speed of the recent advance is inspired by a keen sense of history and market psychology. The 2007-9 bear market in equities has been unusually severe but it has also been unusually short by the standards of previous big bears, as detailed in the table and chart below. This suggests that a period of base-building will be necessary before markets can embark on a sustained recovery. The table compares the fall in the Dow Industrials between October 2007 and March 2009 with the seven biggest bear markets of the last century. The peak-to-trough decline of 54% exceeds every prior downturn except the depression bear of 1929-32, when prices slumped by 89%. emIt is remarkable that the NASDAQ decline 9 years after the tech bubble peaked is actually larger than the …