"We are only three meals from anarchy," said Henry at the dinner table last night, fresh from his new school, and quoting a French cynic.

When a disaster has not occurred for a while, people think it will never happen. After it comes, they expect another one every day. That is why stocks tend to droop after a long bear market and often puff themselves into a bubble after a multi-year boom. When the ground has been dry for a long time, they turn up their noses at dikes and hip boots and rush to buy insurance right after a 100-year flood.

(More about the soggy delta below...)

When a country has had a few good wars, it is eager for more. After it has been on the losing side a few times, it longs for peace.

Markets make opinions, in other words.

What we do here at The Daily Reckoning is look at opinions in order to figure out the major trends in markets. Stock buyers are very bullish. Property buyers are extremely bullish. Ergo, the markets are near a top. As an example of how bullish investors are we turn to page 65 of the Economist.

There we find a picture of Martha Stewart along with a chart of her share price. We note that the price has gone up during her stay in prison. But what is really remarkable is that it went up so high - to a level that makes Martha Stewart Living Omnimedia's P/E ratio four times as high as Google.

The company has been losing money for the last three years. Next year, it may earn a paltry $10 million. At the current price, the company is thought to be worth 160 times those hoped-for earnings.

We are not speculators, but we have spent the last quarter of a century in the publishing business. It is not an easy business and not one that forgives mistakes. This is almost too much to resist: Sell Martha Stewart, dear reader, sell.

"All share analysis is based on a flawed concept," once explained our friend James Ferguson. The flaw is that prices are considered correct. The market is thought to know much more than any individual. So, if you take a view contrary to the market - that is, if you think the price is too high or too low - you are wrong.

When analysts try to figure out where a stock will go, they begin with the premise that the current price is now where it ought to be. The question is: How will it react to future events?

But if the share has already reacted to past events in a faulty way, such as investor's eagerness to buy Martha Stewart just because the woman was behind bars and in the news, they have no solid point of departure. It is like trying to plot a course at sea without knowing where you are in the first place.

It is a waste of time to try to figure out where a stock will go...or even where the entire market will go. The best you can do is to try to figure out where it ought to be; sooner or later, it will be there.

Martha Stewart ought to be under $10. Sell.

*** What's this? The median price of a house fell in July by 7.2 percent, says Steve Sjuggerud. No one has noticed, but the bubble may have popped, says the article on Yahoo.com. Houses are down 14 percent since April. Housing stocks fell 10 percent last month.

*** "End of the bubble is nigh," adds Bill Gross of PIMCO. Get rid of stocks, real estate, corporate and junk bonds, he says.

Bill Bonner is the President of Agora Publishing.  For more on Bill Bonner, visit The Daily Reckoning.