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Don't Let Mr. Market's Good Cheer Fool You

Is a new bubble forming right in front of our eyes?

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Last Thursday, we found out that the number of new residential-building construction projects in September came in at their highest level since Top Gun was the number-one movie in the land, as consumers took advantage of once in a lifetime mortgage rates to buy, buy, buy. The markets took the news in stride, with the S&P 500 rising 2.2% that day (the index finished the week up 5.9%).

Although no doubt many investors and analysts are giddy over this year's consumer-spending miracle, it scares the heck out of me. We've got a new bubble forming right before our eyes, a tale of two economies going in opposite directions from one another. Just like in the late 1990s, almost everyone sees it but most are choosing to ignore it.

Let's look at the facts:

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