Image: Cisco Systems headquarters in San Jose, Calif ©Paul Sakuma, AP

Related topics: Cisco, Nokia, Research In Motion, Microsoft, Bill Fleckenstein

One characteristic of markets is that, in the short run, they do not need to make sense, no matter how badly we may want them to. Thus, as a rule, I am careful not to make too much out of one day's activity, let alone the action in individual stocks.

However, from time to time, the behavior of certain stocks catches my attention, because I think it might provide some useful information. This happened again after Cisco Systems (CSCO, news) reported its earnings results and outlook Feb. 9. The company lost at the game of "beat the number" and its stock price was punished with a loss of about 15%.

Company-specific selling and herd-specific buying

No surprises so far. But what was surprising was that, at the same time, buyers came out of the woodwork to chase the stock of Cisco's competitors higher, apparently deciding that Cisco's shortcomings were specific to the company. (Cisco does have its own problems, but some issues -- like weak government orders -- definitely are not unique to it.)

Folks were rabidly buying F5 Networks (FFIV, news) even though it fell off about a 26% cliff in mid-January (it too lost at "beat the number," although it has recovered about half of those losses since). Meanwhile, Juniper Networks (JNPR, news) saw its stock bid up 10% as Cisco was being sold.

Image: Bill Fleckenstein

Bill Fleckenstein

It was almost as if the market had heard Cisco say, "Hey, we would have done better except that Juniper stole market share from us." Obviously, that was not Cisco CEO John Chambers' statement, and state and local government financial problems (which should be obvious to all) are affecting not just Cisco, but Juniper and others as well. But for now, both companies' shares are just pieces of paper whose prices happen to be headed in opposite directions.

Research in commotion

I don't believe there was much intelligent thought behind the action in either of those two names. Nor did I when Research In Motion (RIMM, news) came alive and popped 5% on Feb. 10, the very day that Microsoft (MSFT, news) and Nokia (NOK, news) announced their partnership agreement (RIMM has since climbed even more). Now those two juggernauts, who have little of the market share for smart phones in the U.S., will join the fray to make the life of BlackBerry maker Research In Motion even more difficult, on top of what Apple (AAPL, news) has already done. But that seemed to cause people to want to buy RIMM more aggressively, even though it will now face even more intense competition. (Microsoft is the publisher of MSN Money.)

As mentioned above, I normally don't dwell on such small snapshots, but these sorts of disconnects show -- albeit in a way that might fall below the radar of the average Main Street investor -- how maniacal the Wall Street mindset is starting to become. Again.

Playtime with play money

There are plenty of wilder examples, especially if we look at what is taking place in cloud computing ideas or some of the zanier small-cap stocks. But to me, the companies cited above are a good illustration of the sort of drunkenness that has once again taken hold in the financial markets, thanks to Federal Reserve Chairman Ben Bernanke's $2 trillion worth of money-conjuring. What we are currently witnessing is a miniature version of the lunacy we saw in the late 1990s. It is not nearly as broad or quite as insane (although the macro risks are enormously larger), but the pockets of sheer craziness are a sight to behold.

What's more, the bulls are (once again) trying to have it both ways. They want to party on the back of the financial asset levitation inspired by Bernanke's printing press, while at the same time convincing themselves that he is a responsible guy whose monetary largesse won't lead to problems (like inflation and higher interest rates), because he will be able to stop the presses just in time.

Given the fact that the Fed's liquidity spigot is supposed to be turned off in June, we are heading toward a moment of truth, when there will be no more free money. (At least for a while -- obviously, if the market throws a temper tantrum and collapses, Bernanke will probably commence yet another round of stimulus and pour even more money into the system.)

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Perhaps sometime around the end of the first quarter there may be an opportunity, for the first time in two years, to take a shot at trading the other side of this insanity by getting short. As to the timing, we will have to wait to discover how things develop, but I would certainly think that by April or so, rabid stock bulls could be on borrowed time, as they begin to deal with the reality that getting drunk is always followed by a hangover.

I really can't believe that, after getting crushed by two big bubbles in a decade, so many have learned so little.

At the time of publication, Bill Fleckenstein owned or controlled shares of the following companies mentioned in this column: Microsoft.

This column is a synopsis of Bill Fleckenstein's daily column on his website, FleckensteinCapital.com, which he's been writing on the Internet since 1996. Click here to find Fleckenstein's most recent articles.