We are starting to observe some of the effects of the Federal Reserve’s prolonged period of easy money. The quest to stabilize the global financial system, a concerted effort by central banks, is now bringing forth signs of froth in a classically historic pattern. The pros of the concerted effort have been general stabilization of the financial infrastructure, a slow recovery in employment and a rebound in the wealth effect, which affects consumption patterns (important to GDP numbers). Where classic signs of trouble are beginning to surface are, for example as noted in today’s journal, high yield bonds are hovering around 5%. Another trend to watch is what is developing in the art market, where auctions are showing signs of froth. Equity markets are moving through to new highs, though valuations may not be at bubble levels, as for example seen in 1999. This remains a trend worth watching. It is nice to see the mortgage agencies returning to the black and to see matters in the real estate market improving; however, one should continue to watch the outliers of prolonged lower rates for signs of potential negative issues.