I remember university. When I wasn’t diligently studying economics, that’ll be most of the time, then, I was doing what everyone does at that time of life. Trying to pack as much enjoyment into those three short years before I had to go out into the world and actually work for living.

Naturally that involved a lot of parties. And while they were fun, as much time was spent feeling tired and stressed as actually enjoying myself. Especially as the night wore on, the booze ran out, and you wondered whether you should just quit and go to bed.

But then… someone would turn up, late back from a club, bearing fresh supplies, and the fun would all kick off again!Yesterday felt a bit like one of those moments. Tired and flagging, the markets got a second wind as a mood of optimism engulfed the financial world. The FTSE went up 150 points, while the Dow Jones Industrial Average was up almost 400, the best start to a second quarter since 1938. Wow!

Meanwhile, reporting season is upon us, meaning all those sly banks have to ‘fess up to their losses and the system can finally purge itself of all but the happiest of happy thoughts.

Lehman asked investors for $3 billion and got $4 billion. Lehman’s shares went up 8.5%. Other banks rose too…

They think it’s all over…

So is this the turning point? There are still losses we don’t know about, but some investors feel that they’ve already been priced in.

“We’ve been hearing that argument for the last six months!” says a world-weary Manraaj Singh.

“At some point all the losses will be priced in,” adds Bill Bonner. “Are we at that point yet? I don’t know. A new trend’s not going to announce itself like an ambassador to the Court of St. James. Instead, it’s going to sneak in like a thief in the night. We’re not even going to realise it’s been here until we wake up the next morning and find the silver missing.”

So beware. We could be seeing a ‘value trap’ — a short-term rise that will suck in early optimists. It’s tempting to think a lot of ‘value’ is being uncovered right now. Tempting to try and be clever and pick up what we think are bargains.

But if we get a long-term bear market, shares could get a lot cheaper before it’s all over. You don’t want to be holding them if that happens.

“It’s going to be a real stock-picker’s market,” says Theo Casey, one of our investment panel. “Undervalued shares could stay ‘undervalued’ for a long time yet. There’ll be some shares out there worth buying, but don’t blindly grab onto anything.”

Manufacturing inflation hits 13-year high; pound at all-time low against the euro

Step off the market merry-go-round, and the picture for the UK’s real economy looks less rosy.

Input costs for UK manufacturers last month saw their largest rise since April 1995. Meanwhile, the pound has hit an all-time low against the euro, adding fuel to the inflationary fire.

This makes a case for the Bank of England to keep interest rates on hold. It’s a chance for Mervyn King to look strong, to stick to his role as an inflation fighter, despite a weakening housing market and fears of recession.

He may just take it — the Bank’s credibility could do with a boost, plus Merv may want to keep his powder dry, and unleash a mega-cut when the going gets really tough.

The markets, so one report goes, have already priced in a 70% chance of a quarter-point-cut. We could see a few disappointed faces in the Square Mile next Thursday lunchtime.

Gold falls, but oil stays above $100

Gold is down to $888, but oil has stayed above the magic $100 mark (excepting a short spell yesterday when it poked its nose just below for old time’s sake).

“I find it interesting that gold fell but oil didn’t,” muses Bill Bonner. “Oil has real demand behind it, while gold is monetary.”

“Absolutely,” agrees Garry White. “You make loads of stuff from oil. Plus,” he adds, “there’s a real supply crunch going on. We all seem to focus on US oil inventories, but we should be looking at capacity in producing nations too.”

The Gulf is experiencing a power crisis, and it’s hitting production capacity.

“The fundamentals are in the driving seat now!” says Garry. “And the fundamentals are tight.”

Which is great news for Garry’s oil play, which is looking mouth-wateringly cheap right now. Find out why oil is one of Garry’s Power Trends — 5 trends that could see smart investors make an absolute killing in the months ahead.

Hope for Zimbabwe

Could Mugabe finally go? The opposition Movement for Democratic Change is claiming victory in the country’s elections.

But the Zimbabwe Election Commission still hasn’t announced a result, giving rise to fears that Mugabe’s Zanu-PF party might try to rig the vote.

“It would be fantastic news if we finally see change there,” says Manraaj Singh.

I asked him what he thinks is the investment case for Zimbabwe. If we do see an end to Mugabe’s 28-year reign, will Zimbabweans finally see a stable, growing economy?

“The investment case is very good,” says Manraaj. “The infrastructure is already in place and so are the human resources. What’s needed is legal clarity and a currency that you can actually get your head around.”

It’s good to be hopeful. But until anything happens, I’m wary of tempting fate.

Until tomorrow

Ben Traynor