Away from the sub-prime desert, luxuriant growth abounds

This comment by Tom Stevenson, in today's Telegraph pretty much sums up the story of this amazing bull market since 2002. As long as sentiment continue to be so bearish, we may have corrections but no long term top.

Because it kept us safe on the savannah, we fear losing more than we enjoy winning. This negative bias is why investors in a bull market find it hard to shake off the belief that it will end in tears. It's why today's markets are so downbeat.

Despite evidence aplenty that the global economy is on fire, we have instead focused on the gloom surrounding America's sub-prime market. We worry that it will spill over into the rest of the economy, dragging down the US consumer of last resort.

I, and many of the investors I speak to, think that assumption's wrong. It is not inevitable that the broader US economy will stumble as a result of a Wall Street, not a Main Street, problem. The average American consumer is wealthier than ever, he's in a job and he's still spending.

While we've been fretting, another story has been unfolding on the other side of the world. Yesterday we learned that China's economy grew in the three months to June at its fastest rate in 12 years. Gross domestic product increased at a blistering 11.9pc.

We also learned that Vodafone's sales in India and Turkey, among the fastest-growing mobile phone markets in the world, increased by 50pc and 32pc respectively. Gem Diamonds, a fast-growing diamond miner, picked up an Australian rival on the cheap because its target was floored by soaring fuel, staff and raw material costs.

These symptoms of breakneck global growth were random picks from yesterday's news. Take your eyes off the sub-prime mess in America and there's a similar tale every day of the week.

The world has shifted in the past few years from excessive supply to excessive demand. The great disinflationary moderation of the 1980s and 1990s reflected too much stuff chasing too few buyers. We are all consumers now and that is why that fence post you couldn't find at B&Q had already been sold in Shanghai and it costs £60 to fill your car.

It's why inflation in China hit 4.4pc in June, higher than Beijing's 3pc target for the fourth month in a row, why underlying prices rose in Britain at their fastest rate for 10 years and why Ben Bernanke will be in no hurry to lower the cost of borrowing in America whatever happens in the credit markets.

Inflation will kill this market not slowing demand - but that is tomorrow's worry.