EDITOR’S NOTE: Liz Peek is a financial columnist.

Investment bank CEOs have become regular pep boys of late, suggesting that the worst of the credit crunch is behind us. The cheery projections by the likes of Lehman’s Dick Fuld and Morgan Stanley’s John Mack were a welcome offset to continued bank write-offs and losses. Mostly, financial industry first-quarter results were not as bad as expected, including this morning’s release from Citigroup. The giant bank announced a $5.1 billion loss, which included $12 billion in write-downs. You might not think this was good news, but it was an improvement over the fourth quarter, when the company lost $10 billion. Relief was audible; the market looks to open up strongly as a result.

Are bankers simply trying to boost investor (and maybe each other’s) confidence? That wouldn’t be such a bad thing, since fear has certainly played a role in the roller coaster financial markets for months. All kinds of credit instruments are selling at ridiculous prices, simply because there are no bidders. For instance, a financial exec told me this week a portfolio of student loans that were 97% guaranteed by the federal government were selling for 90 cents on the dollar. That’s not economics; that’s fear.

The sense that we’re moving through (I was about to say “past” – can’t do that) the mortgage crisis has had an impact. On Wednesday the stock market posted the biggest one-day advance in weeks, rising 257 points, despite oil prices hitting another record high and the dollar sinking to a new low against the euro. This reaction is not entirely silly. The Federal Reserve has aggressively cut interest rates in hopes of thawing credit markets and stabilizing financial institutions. They have also loosened the monetary reins to prevent the country from sinking into recession. If and when Wall Street begins to find its footing, policy makers will stop cutting rates, allowing the dollar to recover some lost ground.

Weakness in the dollar is blamed for soaring oil prices, which hit new record highs this week. Traders are citing all kinds of factors for the strength: Russian production may have plateaued, storms closed Mexico’s ports. I don’t think fundamental factors are dominant here. The announcement of a giant oil discovery off the coast of Brazil and reduced-demand projections from the International Energy Agency barely moved the needle.

Rather, there has been a huge amount of speculative money flowing into oil and into other commodities as hedge funds have desperately looked for trades that are working. Mike Rothman of the International Strategy & Investment Group, one of Wall Street’s best research outfits, confirms this. He points out that while average daily trading volume of key energy futures has historically averaged 3-5 times world consumption, today the figure is close to 14 times consumption. I firmly believe that at some point this bubble will collapse, too.