Yesterday we first posted Jeremy Grantham's latest letter which incidentally is a must read for everyone who still is stupid enough to think this market reflects anything remotely related to fundamentals, when instead all it is pricing in is the money printing Kommendant's daily predisposition to continuing his dollar decimation via ZIRP and shadow QE. Just like all those who are buying Apple at these stratospheric prices are in essence selling life insurance on Steve Jobs (sorry, someone had to say it), all those buying into the market here are betting the Fed is apolitical when it comes to monetary policy decisions: a proposition so naive and ludicrous, it is not surprising that only the momos continue to buy into the rally, which is driven purely by Primary Dealers recycling money they lend to the treasury which in turn is repoed back by the Fed, so that the banks can buy 100x P/E risky stocks with the same money used to keep the treasury curve diagonal. This is nothing but Fed-sponsored monetary pornography at its NC-17 best. Of course, those who grasp it are few and far between, while the rest of the population is ignorant in its hopes that S&P 1,500 is just over the horizon, without a resultant crash back to 0 on the other side of the bubble. So for all those who are still confused (this means you Kommendant Bernanke) here is a 6 minute clip in which Grantham tells it just the way it is: there is nothing more to this rally that free money and banks' last ditch attempt to lock in another year of record bonuses before it all goes to shit. And the implication - play with the big boys at your own peril. "Bubbles are when you should cash in your "career risk units" and do something brave to protect the investors. There is nothing more dangerous and damaging to the economy than a great asset bubble that breaks, and this is something that the Fed never seems to get. Under Greenspan's incredible leadership he managed to give us the tech bubble, and by keeping interest rates at negative levels for three years drove up the housing bubble, and finally the risk bubble. And Bernanke has happily picked up the mantle, and seems totally unconcerned about creating yet another bubble. He has interest rates so low banks can't possible not make a fortune. Savers are being penalized, anyone who wants to buy cash faces a painful experience, and so we are all tempted into speculating, which is apparently what he wants and we've just had one of the great speculative rallies in history, second only to 1932-33."

Some of Grantham's bubble observations:

Bubbles are when you should cash in your "career risk units" and do something brave to protect the investors.

There isnothing more dangerous and damaging to the economy than a great asset bubble that breaks, and this is something that the Fed never seems to get.

The current UK and Australia housing bubbles are no exception to the trendline: if they don't explode it will be the "first time in history that a bubble has not broken."

Other current bubbles: commodities and the emerging market equities.

In every bubble there is an element of greater fool, but nothing will stop the enthusiasm of the EM bubble due to the slow growth of the rest of the world, they have become the "only game in town."

"It is not usual that you will get three bubbles in a 10 or 12 year period. Normally one bubble will chew up 20 years because it leaves such a painful experience, people don't queue up to put their hands on the same stove and burn themselves again. "

The US market is now thoroughly expensive again.

Full must watch clip after the jump.