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Another Bubble Sooner Than You Think?
- China
- Copper
- Fannie Mae
- Federal Reserve
- France
- Freddie Mac
- General Electric
- Germany
- Great Depression
- Gross Domestic Product
- Herd Mentality
- Housing Bubble
- Housing Market
- Institutional Investors
- McKinsey
- Meltdown
- Mortgage Loans
- NASDAQ
- Natural Gas
- Obama Administration
- Real estate
- Recession
- Short-Term Gains
Submitted by Leo Kolivakis, publisher of Pension Pulse.
Not only is the next bubble unavoidable, according to few experts, the next asset bubble can come sooner than you think:
A
year after the collapse of home values triggered the financial crisis
and Great Recession, another rapid and irrational rise in the price of
assets — whether stocks, home values, oil or something else — would
seem unlikely. After all, major bubbles through history have been
spaced decades, if not centuries, apart.
Today, though, amid the
wreckage of the last bubble, the ingredients for the next are still
with us. The price of gold spiking to its highest level ever — $1,060
an ounce on Thursday — is one warning sign, as is the 67 percent surge
since March in the Nasdaq Stock Market index.
One
reason is that there's a sharp rise in the amount of capital sloshing
around the world in search of the best returns. Investors are still
fixated on short-term gains over long-term performance. And information
now travels instantly, fueling a herd mentality and feeding the
optimism wired into our brains.
Bubbles feel good when they're
inflating, but even that upside isn't a replacement for slow-and-steady
growth — the type of economy the U.S. mostly had for decades. The
problem comes when the music stops and the wreckage spreads far beyond
the assets that were inflated.
After the housing bubble popped,
we're lucky to still have a functioning financial system. And because
millions of working Americans now depend on 401(k) plans instead of
pensions for their retirement savings, they're more vulnerable when the
stock market plunges as it did last fall.
"It's
not a matter of could it happen again; it's a matter of when," says
Kenneth Rogoff, an economics professor at Harvard University and
co-author of a new book on bubbles called "This Time Is Different:
Eight Centuries of Financial Folly."
Reckless day traders and
unqualified home buyers got blamed for the Internet stock bubble at the
beginning of this decade and the still-deflating housing bubble. But
they're just bit players in the story. The surge of global capital
seeking the quickest and most profitable investments played a larger
role.
Over the last 30 years, the value of financial assets —
such as stocks, bonds and bank deposits — grew to be four times larger
than annual global gross domestic product. Key factors: personal
savings rates rose in Asian economies, companies piled up profits year
after year and Middle Eastern oil-exporting countries grew wealthier.
Mckinsey
Global Institute estimates this measure of wealth peaked at $194
trillion in 2007. And while it fell back to $178 trillion at the end of
last year, it is still dramatically larger than the $43 trillion in
1990 or the $94 trillion in 2000.
That money helped fuel the
Internet boom. Billions of dollars in seed money enabled Silicon Valley
startups to go public with only vague business plans — and attract more
investors.
After tech lost its luster in 2000, capital stampeded into another promising asset: the U.S. residential housing market.
That
money made it easy for millions of Americans — even those without good
credit or money for a down payment — to get mortgage loans because
global institutional investors were eager to buy the high-yielding
securities the mortgages were packaged into.
Before last year's
financial crisis, China had amassed $376 billion in long-term U.S.
agency debt, mostly in assets issued or backed by mortgage-finance
giants Freddie Mac and Fannie Mae.
Today, record-low rates for
short-term loans in the U.S. — tied to the Federal Reserve cutting its
target rate for overnight bank loans close to zero — are also now
playing a role. And there's more incentive for money managers around
the globe to use dollar-denominated short-term loans to buy stocks,
commodities and other investments that typically deliver higher
returns. That's contributing to the dollar's 6.5 percent decline in
value this year against a basket of six major currencies.
As the
dollar has fallen, gold, copper and other commodities priced in dollars
have become cheaper for overseas buyers. Gold, for example, has risen
21.7 percent in the last six months in dollar terms. But measured in
terms of the euro, the currency used by Germany, France and 14 other
European nations, gold is up only 7 percent over that period.
While
buying gold is viewed as a way for investors to protect themselves
against inflation, it can be a way for money managers to profit off
other investors' inflation fears. This is called momentum trading.
And
as money managers shift funds around the globe in search of the highest
returns, they often end up piling into the same asset classes so they
can show clients they're wise to the next hot investment. This is the
kind of herd mentality that leads to asset prices inflating beyond
their fundamental value.
Harvard professor Rogoff and others say
that's why tougher rules on risk-taking, Wall Street compensation and
borrowing are needed. "Good policy changes could put off the next
(bubble) by 50 to 75 years, instead of five or 10," he says.Asset bubbles date to the 1600s.
During
Holland's "Tulip Mania" in the 17th century, the slender flower became
a status symbol and sparked a brief but ruinous bubble that saw tulip
bulbs sell for as much as the price of a house before the market
crashed. In the late 1800s, shares of U.S. railroads soared and
crumbled. And just a few decades later, after the birth of the U.S.
auto industry helped pump up the economy — and home prices — the stock
market made its historic ascent and 1929 crash, triggering the Great
Depression.
From World War II up until the 1980s, large-scale asset bubbles in the U.S. were rare.
World
economies were tightly regulated and the flow of international capital
was restricted, making it much harder for bubbles to form, says Carmen
Reinhart, an economics professor at the University of Maryland.
It's
a vastly different picture today. International financial markets have
become deeply enmeshed, and the cross-border flow of money has
ballooned, making the U.S. economy "much more crisis prone," Reinhart
says.
It's true that credit is harder to come by today and that
could temper the threat. But until lending standards are further
tightened, a "misalignment" between the risks and rewards of investing
with borrowed money will persist, says Mark T. Williams, professor of
finance and economics at Boston University.
The Obama
administration is calling for tougher measures against subprime lending
to ensure only qualified borrowers get loans. It also has proposed
limiting executive pay to discourage excessive risk-taking and making
banks keep more capital on their books to safeguard against risky
borrowing, or leverage.
Harrison Hong, an economist at Princeton
University who researches bubbles, says the same short-term mindset
that prods investors to pile into the next boom also allows them to
forget the previous bust.
After the bursting of the tech bubble
in 2000, it only took a few years before the same investors who lost
money on Internet stocks turned their attention to real estate as home
prices rose rapidly. "Memories are fairly short," Hong says. "My sense
is that we're going to be in for a repeat of this stuff somewhere down
the line."
Memories are very short. People
who got burned in 2008 will want to make that money up in a hurry.
Greed and fear are the only emotions that govern markets.
But knowing another bubble is heading our way doesn't help much unless you figure out where it's going to be. NPR reports Where's the next boom? Maybe in `cleantech':
Our
economy sure could use the Next Big Thing. Something on the scale of
railroads, automobiles or the Internet — the kind of breakthrough that
emerges every so often and builds industries, generates jobs and mints
fortunes.
Silicon Valley investors are pointing to something
called cleantech — alternative energy, more efficient power
distribution and new ways to store electricity, all with minimal impact
to the environment — as a candidate for the next boom.And while no two booms are exactly alike, some hallmarks are already showing up.
Despite
last fall's financial meltdown, public and private investments are
pouring in, fueling startups and reinvigorating established companies.
The political and social climates are favorable. If it takes off,
cleantech could seep into every part of the economy and our lives.
Some
of the biggest booms first blossomed during recessions. The telephone
and phonograph were developed during the depression of the 1870s. The
integrated circuit, a milestone in electronics, was invented in the
recessionary year of 1958. Personal computers went mainstream, spawning
a huge industry, in the slumping early 1980s.
A year into the
Great Recession, innovation isn't slowing. This time, it's better
batteries, more efficient solar cells, smarter appliances and electric
cars, not to mention all the infrastructure needed to support the new
ways energy will be generated and the new ways we'll be using it.
Yet
for all the benefits that might be spawned by cleantech breakthroughs,
no one knows how many jobs might be created — or how many old jobs
might be cannibalized. It also remains to be seen whether Americans
will clamor for any of its products.Still, big bets are being
placed. The Obama administration is pledging to invest $150 billion
over the next decade on energy technology and says that could create 5
million jobs. This recession has wiped out 7.2 million.
And
cleantech is on track to be the dominant force in venture capital
investments over the next few years, supplanting biotechnology and
software. Venture capitalists have poured $8.7 billion into
energy-related startups in the U.S. since 2006.
That
pales in comparison with the dot-com boom, when venture cash sometimes
topped $10 billion in a single quarter. But the momentum surrounding
clean energy is reminiscent of the Internet's early days. Among the
similarities: Although big projects are still dominated by large
companies, the scale of the challenges requires innovation by smaller
firms that hope to be tomorrow's giants.
"Ultimately IBM and
AT&T didn't build the Internet. It was built by Silicon Valley
startups," says Bob Metcalfe, an Internet pioneer who now invests in
energy projects with Polaris Venture Partners. "And energy is going to
be solved by entrepreneurial activity."
The action is happening
at companies like GreatPoint Energy in Cambridge, Mass., which has
developed a technique for turning coal into natural gas more cheaply
and efficiently than previous methods.
GreatPoint plans to break
ground next year on a power plant in Houston that will cost $800
million and create thousands of construction jobs, says its CEO, Andrew
Perlman. Dow Chemical Co. and energy giants AES Corp., Suncor Energy
Inc. and Peabody Energy are all GreatPoint investors.
"The opportunities," Perlman says, "are staggering."
A123
Systems, a Watertown, Mass., maker of lithium-ion batteries for
electric cars, had one of the most lucrative public stock offerings
this year, raising $437.5 million. Its stock price jumped more than 50
percent on the first day of trading in September, with investors
willing to overlook that the company has yet to make money.
The
Obama administration's promises about cleantech funding have galvanized
the industry, reassuring entrepreneurs that they will have paying
customers. The administration has said it will focus on putting more
hybrid cars on the road, boosting the amount of electricity from
renewable sources and investing in ways to cut pollution from coal.
One
target is "smart grids." As utilities install digital meters in homes
and Americans buy appliances that can communicate with the electric
system, individual power consumption can be monitored more closely.
People could be cued to dial down appliances such as refrigerators and
air conditioners when electricity is in highest demand. Such
fine-tuning in millions of homes can reduce the need for new power
plants.
At Tendril Networks Inc. of Boulder, Colo., which makes
software that links utilities to smart-grid devices in homes, the staff
has tripled over the past five months to 90. CEO Adrian Tuck says
Tendril could grow even more if some of the $4.5 billion earmarked for
smart grids in this year's federal stimulus goes to Tendril's clients.
"What
we're about to see is every bit as big as the telecom revolution that
gave birth to the Internet and cell phones," Tuck says. "It's going to
create as many jobs and as much wealth for this country, if they get it
right. Big, Google-sized companies are going to be born in this era,
and we hope to be one of them."
The government's push for these
developments parallels the expansion of railroads in the 19th century,
when the government granted blocks of land to companies laying track,
says Jack Brown, an associate professor in the University of Virginia's
Department of Science, Technology and Society.
One
difference, Brown points out, is that clean energy is such a vast field
that government could make the wrong choice in backing one type of
technology over another.
It's not just startups getting in the
game. General Electric Co. plans to string transmission lines to
deliver solar or wind power. Hewlett-Packard Co. is adapting techniques
for printer cartridge chips so digital sensors can send data to smart
grids.But how much of an economic boost does all this add up to?
It's hard to tell — at least at this stage, without products people
actually want to buy.
The laser, for instance, was a big
innovation, but it wasn't clear at first what it could be used for.
That's why there wasn't an economic boom in the 1960s from the advent
of lasers, even though they ended up driving everything from medical
devices to CD players for four decades.
Sung Won Sohn, an
economics professor at California State University, Channel Islands,
believes upgrading electric grids and finding new sources of power will
provide steady job growth — but won't be an economic powder keg.
Clean
energy projects could simply replace old jobs and functions, like
meter-readers. And there's no guarantee new jobs won't shift to
countries with cheaper labor.
Some innovations take longer to
reveal their economic effects. There are big booms based on specific
innovations — along the lines of railroads, automobiles and the
Internet — and then there are technologies that grow slowly, spawning
offshoot industries for entrepreneurs to exploit over decades.
For
example, the emergence of the integrated circuit led to the development
of computer microprocessors, which enabled the PC revolution and in
turn the Internet age. There's every reason to believe energy
technology will fall into the same category, Brown says, but he adds:
"It depends on how the bets actually play out."
Will
the next asset bubble come sooner than we think? Will it be in cleantech?
Biotech? Nanotech? Infrastructure? Oil? Gold? Bonds? BRIC economies? Or will
the next bubble be Canada? Yes, Canada! Nobody really knows, but big bets are being
placed by some very big funds. The only thing I know is the world is
awash with liquidity, a bubble is forming and we won't know about it
until it's too late.
»
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it will take time, but China will turn out to be the biggest bubble of this century.
SP500 daily chart has a nice rising wedge . . .
www.zerohedge.com/forum/market-outlook-0
The Canadian employment numbers were, to a large extent, up due to public sector hiring. This is not a good news number.
Resource sector industries have been sold to foreigners at an alarming clip during the Harper reign. Inco has been sold to a Brazilian company who are busy trying to bust the balls of the local work force and local businesses who live off the mining sector in Sudbury. Their job will be complete when workers are making Brazilian wages and all suppliers are sourced outside Sudbury and purchased at the cheapest point in the world. The increase in profit is repatriated back to Brazil. This is good for Brazil and bad for Canada. The Canadian government will be losing a lot of good paying private sector jobs who pay high taxes. I'm not sure what the upside is for Canada having their resource sector sold out to foreigners.
If the resource sector is booming in Canada, please tell me where. I live in an area that survives on the resource sector (northern Ontario) and we are hurting badly. Virtually all money being thrown around in the area is government money for infrastructure upgrades. At some point in the future, the big bills the federal government is racking up will come due. Canadians will be shocked how deeply in debt our federal government has put us. They may also be surprised how the Conservative government allowed a massive sell-off of resource companies to go through quietly with nary a peep.
How about the Russian dairy industry?
A whole host of economic data for Canada was released today including employment for its' 34 million inhabitants:
"Employment growth in September was wholly accounted for by full-time jobs which surged 91,600. Part-time positions on the other hand fell some 61,400. ...the number of self-employed climbed 11,300."
An E-Trade account funded with money from weed should not be considered long-term self-employment.
For ease of calculation, let's assume a 10X multiplier for comparison to the US with 307 million inhabitants (+ illegals). Here's how it would read:
Employment growth in September was wholly accounted for by full-time jobs which surged 916,000. Part-time positions on the other hand fell some 614,000.
Imagine such a headline!
Canada's bubble so big that if it doesn't pop inflation is gonna totally wipe them out.
Of course it's Canada.
Canada is pursuing a brutally weak loonie strategy. This will lead to the actual concept of inflation, which few here seem to understand.
America in inflation? What loans, and to whom?
The author of this piece is an absolute imbecile .
I just walked in the door from a 4 day trip to Saskatoon, Sak.
5 monstrous potash mines surround the city.
grain field that litterally go on for hours and hours.
Energy pipelines that go to the lower 48 from every immaginable area of the country.
A young , highly educated , highly motivated 21st century work force.
did you not see POTASH CORP laid off another 700 mine workers the other day ?? another bubble bust in fertlizer
So the fortunes of Canada lie with Sakatoon? God help us! I am a proud Canadian and happy that the heartland is doing well, but the economic engine still lies with Ontario and Quebec, as well as Alberta. I do not see Canada as a bubble yet, but that senior pension fund manager was right, things are getting bubbly in Canada. Lots of hot money flowing our way.
So the fortunes of Canada lie with Sakatoon? God help us!
Sarcasm is the basest form of humor usualy designed to cover for the lack of facts. Saskatoon is a template city representing the country of Canada. Remember dear readers that Saskatoon is a very clean ,new, thriving town.
Canadians work their tails off generating real money from real natural resources . "Getting bubbly" is a subjective term to the maximum as you back peddle 100 MPH.
Real cash flow generated from real natural resources spread out over vast expanses of Canada positioned to take advantage of a real global up turn.
Mr. Kolivakis........"hot money flowing our way" means that money seeks opportunity and the opportunity is in Canada.
Don't confuse fundamentals with hot money. There are sound fundamentals underlying the Canadian economy but there are also huge hedge fund flows going into the TSX, commodities and our currency. The loonie's (CDN dollar) latest move isn't just based on strong fundamentals. Let's not kid ourselves, there are serious structural problems in Canada too, the least of which is soaring default rates on credit cards. Having said this, Canada's economy is diversified, resource rich and will benefit from a stronger than expected global economic recovery. The hot money flows are not a problem...yet.
My vote is for CANADA.
Yes, Canada.
Gold will never be in a bubble, but junior gold miners ... they are PRIME bubble material. The Canadian stock market is the world center for junior resource companies. Something like 75% of ALL the junior resource company financing in the world is raised in Canada.
I was in Toronto yesterday on business and was amazed at the amount of construction cranes all over the city. From northern suburbs to downtown there was condo tower construction still going on like mad and clearly a lot of it had just been done over the past few years (modern, gleaming towers dominate). Not to mention tons of major road repair and construction. That said, the business manager I met with pitching my product to commented that 2009 was a very bad year (they benefit directly from construction spending). Perhaps all I was looking at were the very late stage projects being completed. I was also impressed by a pretty high proportion of very hot women. They typically gravitate towards bubbles. Saw that phenomenon burst with the tech bubble in San Francisco back in 2000. I don't think that city will ever fully recover on that metric.
"I was also impressed by a pretty high proportion of very hot women. They typically gravitate towards bubbles."
Very astute. The demographics and social activity of a place or surrounding an industry is a great way to spot a bubble. Trick is traveling enough to track this in multiple places. Some salesman needs to start a metric. You?
Are you sure the cranes in Toronto are active? We have a few legacy projects (holes in the ground) in my city. They leave the cranes there because who else needs them?
NYC 1999, London 05 - 07, Sydney 09...hotties everywhere
Russia 2008. Best ever, baby.
You could practically smell those girls ovulating walking by a banker.
6 months ago, we returned from a roadtrip through Europe talking to money managers. We quickly saw that these managers had 50% LESS MONEY to invest (either due to recent market losses, redemptions, or money flow contraction). By July/August, we concluded (coupled with this premise) that market liquidity dried up prompting one close colleague of ours to state "...there is no market anymore, just the government enabled entities." Which today, allows the so-called HFT's to dominate buy and sell flows. We follw Trim Tabs closely, and, we agree with their analysis that money flows have contracted precipitously. Due to these factors -- especially the concentration of money in fewer, larger concentrated hands -- it sets up the potential for a disorderly decline in the markets. Like in '87, portfolio insurance actually worked against the market when it finally turned lower. Below we recite some potential reasons we're considering for a nasty decline:
1) Longs have no more or limited money to invest (2) Longs will turn and sell this market quickly to protect gains made in the last 3-6 months (3) Few shorts are left to bid this market up (4) New shorts will enter the market on weakness (5) Government money is getting tapped out (politically, and with the public). (6) Underlying market fundamentals are weak (7) Seasonals, cycles, and technicals strongly argue for a top and selloff, and (8) Computer led programs and quants will pile into a negative momentum led selling environment
Leo, have you never heard of copyright law? Do you get permission to copy/paste long articles in their entirety? Unless the law has changed, you can post a link and "fair use", i.e. maybe 2 or 3 paragraphs that are central to whatever point you're trying to make.
GS,
Now I know who you are, good old Mish. For the nth time, I provide links, cite the source and I paste articles because I like to refer to them later on. Now buzz off.
From the website of the Miami Herald, where you lifted the first article without ever referring to the Miami Herald or the Associated Press, which wrote the story:
http://www.miamiherald.com/825/index.html
2. Limited License/ Copyright and Intellectual Property Law Restrictions. Except for public domain material, the content on this site is protected by intellectual property laws, including U.S. copyright laws. You are hereby granted a non-exclusive license to use the material at this site ("Content") while connected to this site (including, where available, to email individual stories to friends directly from this site). You are also granted a limited license to print one copy of any Content posted at the site, but only for your personal use. Except as expressly provided above, all rights are reserved. Among other things, except to the extent required for the limited purpose of reviewing material on our site, electronic reproduction, adaptation, distribution, performance or display is prohibited. Changes to or deletion of author attribution or copyright notices are prohibited. Commercial use of any of the Content is strictly prohibited.
So report my blog because I have been pasting articles forever, providing links and sources. I get no monetary gains from my blog. And just so you know, the article comes from AP and is widely distributed by several news outlets. You can call me a thief if that makes you feel better, but you are ridiculous and completely anal. Blogs are information arbitrage sources. MSM articles are often incomplete and I do provide my thoughts on many topics I cover. Again, buzz off. Who made you cyber-cop?!? Don't stick your nose where it doesn't belong!
I noted that the Miami Herald article you lifted was from the Associated Press. The news outlets that distribute AP articles pay for them. They don't violate copyright law and try to rationalize it.
GS,
Are you serious?!? If they do not want them to be read at large, they should charge a subscription for them. Let's not be ridiculous here. I am not claiming these are my articles and you are just being an arse. If all we do is provide hyperlinks to articles (that often vanish after a certain time), then what's the point? Anyways, let the real police deal with copyright laws and stop sticking your nose where it clearly doesn't belong.
They want the articles to be read on their site, you idiot. Page hits, advertising revenues, etc. I posted the Miami Herald's copyright policy which says that their articles are not to be reproduced electronically. They pay for the content whether they create it or buy it from a source like AP.
If all we do is provide hyperlinks to articles (that often vanish after a certain time), then what's the point?
What's the point of you pasting together lifted article after lifted article? I have no idea.
GS,
Get over it already. Chances are they will get more hits by me providing a link to the article. I provide a service by a) finding articles, b) linking them back to original sources and c) commenting on the articles. If you really want to fight copyrights, go join the FCC. I am ignoring you.
Congratulations Leo. You got called on the carpet and instead of being a stand up guy, you respond like a fucking 8 year old. Grow the fuck up, douche.
Grow up? Read your infantile response ya jerk! People like you remind me why I do not allow comments on my blog.
Chances are he will "get over it", but your tone is just thug and the article is theft. I'm sorry I've spent the time, I promise I won't click on any article signed by yourself again.
Cheers
I'm not that half-wit "Mish".
The issue isn't what you like to do, it's copyright law. You are stealing somebody else's work. Much of the time you don't even cite the source, you just have a hyperlink. If the reader doesn't clip the hyperlink they don't even know who you've lifted from. We've got huge numbers of people on this website complaining about a lack of respect for the rule of law (which I agree with), yet you think you can just ignore copyright law because copy/pasting long articles is easier than coming up with something to say on your own. Of course, given the incoherence of most of what you write on your own I can sort of understand it.
Stop thief!
Well the imagination worked in houses , so green tech will do.
And as you say , nothing of this is revolutionary , just minor evolution of old concepts.
Great analysis, perhaps they should monitor phone conversations and see how many times "netflix" is mentioned:
NFLX Netflix: Search data indicates continued momentum - Kaufman (46.04 )
Kaufman notes that based on their analysis of searches for the term "Netflix" on Google, they expect strong sub growth for 3Q. Historically, there has been a 92% correlation between search volume growth for "Netflix" and gross sub growth. For 3Q, "Netflix" searches showed an increase of 47% Y/Y which represents an increase from the 41% growth in 2Q and 42% growth in 1Q. The firm continues to expect strong sub growth over the next several years as per their recent survey, which indicates that 20% of all respondents that are not currently subscribers plan to sign up for a DVD by Mail service in the next five years. Meanwhile, search data continues to indicate declines for Blockbuster as evidenced by the 25% decline in "Blockbuster" searches in 3Q and 21% decline in 2Q. While not necessarily a proxy for Blockbuster Total Access, the firm believes the search data clearly shows overall share losses for Blockbuster.
Ever wonder how those high-priced analysts do their work ?
Great analysis, perhaps they should monitor phone conversations and see how many times "netflix" is mentioned:
NFLX Netflix: Search data indicates continued momentum - Kaufman (46.04 )
Kaufman notes that based on their analysis of searches for the term "Netflix" on Google, they expect strong sub growth for 3Q. Historically, there has been a 92% correlation between search volume growth for "Netflix" and gross sub growth. For 3Q, "Netflix" searches showed an increase of 47% Y/Y which represents an increase from the 41% growth in 2Q and 42% growth in 1Q. The firm continues to expect strong sub growth over the next several years as per their recent survey, which indicates that 20% of all respondents that are not currently subscribers plan to sign up for a DVD by Mail service in the next five years. Meanwhile, search data continues to indicate declines for Blockbuster as evidenced by the 25% decline in "Blockbuster" searches in 3Q and 21% decline in 2Q. While not necessarily a proxy for Blockbuster Total Access, the firm believes the search data clearly shows overall share losses for Blockbuster.
Anything TBTF . They will become black holes
with inflated values.
Canada was an idea a senior Canadian pension manager gave me. Go to the end of more bubble trouble. Here is what he wrote me:
China.
Point of contention: On the one hand you suggest that gold could be the next bubble. On the other hand, you point out that while gold has risen 21+% in 6 months in dollar terms, but only 7% in Euro terms. This does not seem to be a bubble to me. As a point of comparison, over the last 6 months the DAX is up about 27%. So, equities are up almost 4x the price of gold in euro terms. Where's the bubble?
Federal Reserve Notes
Now there's an asset that trades far above its intrinsic value...
I think it's Gold. Canada? Well, not so much.
Lithium. A few deposits in Canada I believe, but biggest deposits are in South America. I think Bolivia. Can't make too much "green" stuff without lithium for batteries.
Dude, you are WAY too wordy.
Hi Leo.
I have come to the conclusion (sound of trumpets and bugles playing, flags unfurling) that this whole American (nay, world) financial system of smoke and mirrors NEEDS bubbles.
It cannot survive without them; it is the boom-and-bust-cycle.
It does not really matter (well, to a day trader it does a great big, actually, but to a Joe Six Pack it does not) what it is.
There was a housing (stoked by 'W' Bush and Clinton, democrats and republicans deregulation and laws to MAKE banks lend to minorities and poor) bubble, there was an oil bubble (pensions and hedgies buying into futures and getting the price to absurd levels, while CNBC proclaimed that it was greater demand from China and India, and crazy people proclaimed peak oil), there will be more.
Many more to come.
"After all, major bubbles through history have been spaced decades, if not centuries, apart."
That is not true - now bubbles are happening concurrently, like the aforementioned housing and oil bubble.
americangoy
It's Jim Cramer, Bi=-polar world. Zero sum game after all.
Only the pockets change.
Canada a bubble? Right... The currency hasn't plummeted like the US dollar, so its a bubble?
Commodities are a fundamental part of economic activity. As long as there is economic activity, Canada will be ok. I mean, if resources all of a sudden are over-abundant, and prices drop substantially, Canada will be in a lot more trouble than they are in now. But for commodity prices to go down, what input is going to drive the price of commodities down? Labor?
Natural resources like clean water,wheat, beef, lumber, ore, oil, marijuana are plentiful, and I don't see what spikes the prices down in the short or medium term, to be honest.
:-)
WE ARE IN A BUBBLE NOW