Here at The Daily Reckoning headquarters we are carefree worrywarts. We buy gold and only worry for the fun of it.

What we worry about now is the remarkable lack of worry on the part of others. There is something unfair about it. Since others worry so little, we feel we need to worry more. For the moment, we carry all the world's worries on our shoulders like a demented Atlas. Bond investors continue to accept yields so low they must think there is nothing to worry about. Even the junkiest bonds sell for historically low premia over Treasuries.

Stock buyers load up on Google at prices that make us dizzy; it is as if they thought Google would be the last new thing ever to come along. Volatility measures are as low as they tend to go, advisors are consistently bullish, and even the hedge funds have stopped hedging (there was no money in it, and they thought, nothing to hedge against). Hedge funds have joined the reckless chase for quarterly returns. Managers who prudently hedge against risk underperform their competitors; they are quickly shouldered out the way.

What is particularly odd about the present lack of worry is that there seem to be so many things to worry about.

This week, for example, the yield curve inverted. Lenders got more for short-term loans to the government than for long terms. That is odd in itself, of course. Risk increases with time. As the years go by, the more things that could go wrong will go wrong. Investors normally want a little extra yield to compensate for the extra risk they take. Yet, the yield on a three-month U.S. Treasury note was higher on Tuesday than the yield on a 10-year note. Go figure.

Something has clearly gone wrong already. But investors don't seem to care. And they don't seem to care either that an inverted yield curve is a classic sign of a coming recession. There are a lot of recession predictors. But the yield curve humping over in the wrong direction - with long-term yields lower than short-term yields - is the most reliable predictor of on-coming trouble.

Maybe investors don't read the newspapers. Tokyo had to close its stock market on Tuesday. There were so many people trying to sell all at once - with major tech stocks plummeting - the exchange couldn't keep up with it. Could that happen in New York? Who knows? But who worries?

Iran is also in the news lately. The neocons are threatening to bomb the place. We worry about a chain reaction that sets off explosions in the oil market, in derivatives, in emerging market debt, in Russia, in China...who knows where else? What if oil shot up to $100 a barrel? That seems like the least that might happen.

But again, we worry alone. Investors see nothing to worry about. We read in the Financial Times that Iran's neighbor, Iraq, is planning to sell bonds - $2.7 billion of them. Who would buy bonds from Iraq? One who never read the paper? One who knew no financial history? One with brain damage? We can't imagine an investor, prone to worry, who would do such a thing - unless the yield was spectacular. Yet, according to the FT, Iraq's bonds will mature in 2028 and pay a coupon of only 5.8%!

Meanwhile, America's federal debt pushed over $8 trillion recently. The money supply is exploding at a 20% annual rate. The trade deficit swells...along with the feds' deficits. The economy looks like it has been stung on the face by a wasp. We Americans can barely look at ourselves in the mirror without feeling a little queasy.

Housing also seems worth a worry...or a mass. Early figures (and anecdotal
evidence) tell us that buyers are disappearing. House prices are buckling in many areas. Inventories are rising. Does anyone bother to look on the wall; there must be some handwriting on it. If real estate prices stop going up, householders will lose an important source of easy money in 2006; the ATM machine in their bedroom will be closed down. Consumer spending and housing are 90% of GDP growth. Without the housing boom, the economy is almost certain to go into recession. Two million people declared bankruptcy last year - even with house prices rising at double-digit rates. Imagine what will happen when the boom ends?

Let's see...in 2005, the median down payment on a new house was only 2%, on a $150,000 house. Nearly half of the buyers didn't put down a penny. What happens if the house goes down in price by 2%? The buyer's entire equity has disappeared. What if it goes down by 10%...or 30%?

We can already hear the refrain on drive-time radio: "Take this house and shove it."

Already, the highways out of California are getting crowded with people leaving the state. No wonder. The typical house in Los Angeles sells for $495,000. This is remarkable on several levels. First, have you seen the typical Los Angelino's house? It is a misbegotten affair, designed by a company that specializes in schools and prisons, glued together with cheap materials, and graced with no natural charm. It is comfortable, but people feel no loyalty to it; they will get out when the getting is good.

Meanwhile, an equally disagreeable barrack can be found in another part of the country for less than half the price. In Jacksonville, FL, for example, the typical house sells for only $181,000. Pay levels in both cities are about the same. So, people are leaving the Golden State at the rate of about 100,000 a year. Shouldn't California prices fall?

But do you worry about that? If so, welcome to a very small confrerie of worriers. The rest of the country is worry-free. Sans souci. Delightfully, blissfully, happily unconcerned.

Or maybe they notice the threats but figure they will offset one another...like a fire on a sinking ship...or a fat man who takes up smoking so he won't have to worry about a heart attack...or a presidential race where both candidates are morons. Money supply growth is hyperinflationary, but debt defaults are deflationary. China is stealing our business, but China could blow up at any time. They are printing up new dollars by the billions, but people need more of them to pay their debts.

House prices are peaking out, but maybe now more people will be able to afford them. How will it end?

We not sure, but it never hurts to be prepared...and to grab the asset everyone will rush to buy when housing prices crash.

Bill Bonner, back in London with more opinions...

*** "The flat tax is NOT THE ANSWER!" writes one DR reader in response to yesterday's Steve Forbes essay.

"Initially proposed at 17% [while even Russia proposes only 13%], how long before the level becomes voted up [by Congress, of course] to 20%, then 23%, 25%, 30%, there is no limit to the voraciousness of an empire-building government. The tax would traverse the same route as has the postage stamp. I remember penny postcards and first class letters sent over 500 miles overnight for only $.02 !! The government now requires 195% more and delivery time is no longer overnight, despite advances in the qualitry and speed of transportation!!"

Addison's response:

"Steve's plan would require that a 60% majority vote in Congress would be needed to raise the flat tax once in place. A sixty percent majority? Like that will ever happen.

"Our interest in this subject came about while doing research for Empire of Debt. Before the Revolution of 1913 - the implementation of the income tax, the direct election of Senators and the establishment of the Federal Reserve - the feds didn't have a blank check on the future. They had to raise the money they spent through tariffs and what not. After the income tax was in place, Congress felt free to borrow against future revenues with abandon.

"Then in the 30s, after FDR had racked up more debt then all the presidents before him combined, he needed a rationale for his plans. Along came "7 Economists From Harvard And Tufts" with a little book called A Planned Economy for the American Democracy. If ever there was an Orwellian socialist tract, this bad boy is it. I have it sitting on my desk as a reminder to the absurdities politicians get up to. In the book, they give the empire builders the justification they need to rack up debt ad infinitum. 'It's a public debt,' they say, 'And we owe it to ourselves. Therefore, we never have to pay it back.'

"Oy.

"It's been a thread in the political fabric of the nation ever since. While we're not sure, starting with an abolition of the IRS - a revocation of Congress' blank check on the future - seems like a good place to start. We're a resilient nation. It would be a shame to let the scaliwags in Washington ruin it for the rest of us."

*** Gold might finally be correcting. We hope so. We would like to buy more. But instead of falling and consolidating recent gains, it keeps racing ahead of us. Early in a real bull market, there are typically major setbacks to test investors. Weak ones drop out. "Well, I guess that's over," they say to themselves. Or people who never believed in it at all are emboldened to crow: "See, I told you it would never take off."

The bulls are discouraged. Many of them sell. The price drops. Often, it stays down for a surprisingly long period...building up another base. Then, it begins its upward march again.

Gold has doubled from the summer of 1999, when we first recommended it in The Daily Reckoning. Is that all there is? We doubt it. But we'd like to see a real correction to shake out the weak buyers and give us a chance to buy more at a lower price.

Richard Russell tells us that the average ratio of gold to the Dow is about five to one. That is, going all the way back to 1885, it took about five ounces of gold to buy a share in all the Dow stocks. That ratio went to an all-time high on July 16th, 1999, when it took 43.85 ounces of gold to buy the Dow stocks. It was about then that we announced our "Trade of the Decade" - sell the Dow, buy gold. Since then, stocks have eased off a bit and the price of gold has shot up. Currently, it takes about 20 ounces of gold to buy the Dow, a lot less than six years ago, but still a lot more than usual.

Will the normal relationship between the Dow and gold be re-established before the end of the decade? How? Our guess is that gold will rise, and the Dow will fall to meet it. The day is gold at $1,000 and the Dow at 5,000 is easy to imagine. We doubt it will stop there. Once in motion, markets tend to overshoot the averages. Briefly, in 1980, you could buy the entire Dow with just one ounce of gold. That day could come again too, says Russell, who guesses it will come with both the Dow and gold priced about $3,000.

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