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Bubbles, Bubbles Everywhere

Tyler Durden's picture




 

Submitted by Michael Snyder of The Economic Collapse blog,

Is there any doubt that we are living in a bubble economy?  At this moment in the United States we are simultaneously experiencing a stock market bubble, a government debt bubble, a corporate bond bubble, a bubble in San Francisco real estate, a farmland bubble, a derivatives bubble and a student loan debt bubble.  And of course similar things could be said about most of the rest of the planet as well.  In fact, the total amount of government debt around the world has risen by about 40 percent just since the last recession.  But it is never sustainable when asset prices and debt levels increase much faster than the overall level of economic growth.  History has shown us that all financial bubbles eventually burst.  And when these current financial bubbles in America burst, the pain is going to be absolutely enormous.

You know that things are getting perilous when even the New York Times starts pointing out financial bubbles everywhere.  The following is a short excerpt from a recent NotQuant article...

The New York Times points out that just about everything on Earth is expensive by historical standards.   And then asks the seemingly obvious question:  Does that make it a bubble?

 

Welcome to the Everything Boom — and, quite possibly, the Everything Bubble. Around the world, nearly every asset class is expensive by historical standards. Stocks and bonds; emerging markets and advanced economies; urban office towers and Iowa farmland; you name it, and it is trading at prices that are high by historical standards relative to fundamentals. The inverse of that is relatively low returns for investors.

 

Quite possibly?”  We’re not sure what definition of the word “bubble” they’re using.   But in our book when the price of literally everything blasts upwards, obliterating the previous ceilings of historical benchmarks, it’s a pretty good indication that you’re in a bubble.

Of course when most people think of financial bubbles the very first thing they think of is the stock market.  And without a doubt we are in a stock market bubble right now.  The Dow has risen more than 10,000 points since the depths of the last recession.  And it is nearly 3,000 points higher than it was at the peak of the last stock market bubble in 2007 when our economy was far stronger than it is now...

Dow Jones Industrial Average 2014

But of course these stock prices do not reflect economic reality in any way whatsoever.  Our economy has not even come close to recovering to the level it was at prior to the last financial crisis, and yet thanks to massive Federal Reserve money printing stock prices have soared to unprecedented heights.

At some point a massive correction is coming.  No stock market bubble lasts forever.  For a whole bunch of technical reasons why serious market turmoil is on the horizon, please see a recent Forbes article entitled "These 23 Charts Prove That Stocks Are Heading For A Devastating Crash".

The bubbles in the financial markets have become so glaring that even the central bankers are starting to warn us about them.  For example, just consider what the Bank for International Settlements is saying...

The Bank for International Settlements has warned that “euphoric” financial markets have become detached from the reality of a lingering post-crisis malaise, as it called for governments to ditch policies that risk stoking unsustainable asset booms.

 

While the global economy is struggling to escape the shadow of the crisis of 2007-09, capital markets are “extraordinarily buoyant”, the Basel-based bank said, in part because of the ultra-low monetary policy being pursued around the world. Leading central banks should not fall into the trap of raising rates “too slowly and too late”, the BIS said, calling for policy makers to halt the steady rise in debt burdens around the world and embark on reforms to boost productivity.

 

In its annual report, the BIS also warned of the risks brewing in emerging markets, setting out early warning indicators of possible banking crises in a number of jurisdictions, including most notably China.

 

“Particularly for countries in the late stages of financial booms, the trade-off is now between the risk of bringing forward the downward leg of the cycle and that of suffering a bigger bust later on,” it said.

Sadly, just like in 2007, most people are choosing not to listen to these warnings.

Another very troubling bubble that is brewing is the massive bubble of consumer credit in the United States.  According to the Wall Street Journal, consumer credit in the United States increased at a 7.4 percent annual rate in May...

The Federal Reserve reported Tuesday that consumer credit—consumer loans excluding real estate debt—in May increased at an annual rate of 7.4% to a record $3.195 trillion. Most of that gain came from a 9.3% increase in nonrevolving credit, the bulk of which is accounted for by auto and student loans. Revolving credit, which is primarily credit-card debt, expanded at a more muted 2.5% rate after jumping 12.3% in May.

That might be okay if our paychecks were increasing at a 7.4% annual rate, but that is not the case at all.  In fact, median household income in America has gone down for five years in a row.  As the quality of our jobs goes down the drain, our paychecks are shrinking even as our bills go up.  This is putting an incredible amount of stress on tens of millions of American families.

And when you look at the overall debt bubble in this country, things become even more frightening.

In a previous article, I shared a chart which shows the incredible growth of total debt in the United States.  Over the past 40 years, it has gone from about 2.2 trillion dollars to nearly 60 trillion dollars...

Total Debt

 

Is this sustainable?

Of course not.

None of these financial bubbles are.

It is not a question of "if" they will burst.  It is only a question of "when".

And some believe that we are rapidly approaching that point.  In fact, Marc Faber believes that we are seeing signs that it may be starting to happen already...

It’s the question investors everywhere are wrestling with: Are asset prices in a bubble, or do they simply reflect the fact that the global economy is growing once again?

For Marc Faber, editor of the Gloom, Boom & Doom Report, the answer is clear. In fact, he says the bubble may already be bursting.

 

“I think it’s a colossal bubble in all asset prices, and eventually it will burst, and maybe it has begun to burst already,” Faber said Tuesday on CNBC’s ‘Futures Now‘ as the S&P 500 lost ground for the second-straight session.

 

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Thu, 07/10/2014 - 20:36 | 4945734 Tasty Sandwich
Tasty Sandwich's picture

Did this guy up his list format?

I need 27 signs that there are bubbles everywhere.

Thu, 07/10/2014 - 20:56 | 4945789 Newsboy
Newsboy's picture

The only way to continue exponential growth of money, while the economy can no longer grow, is to segregate the money in bubbles. Extend and pretend.

It can't continue too long, can it?

Exponential growth economy is over.

Thu, 07/10/2014 - 21:20 | 4945886 Tasty Sandwich
Tasty Sandwich's picture

First saw "COLLAPSE" in 2010.

Hopefully Michael Ruppert found some peace.

Thu, 07/10/2014 - 22:19 | 4946041 u8mapwho
u8mapwho's picture

It can go on and on...exponential here we come. My bet is permanent inflation of everything (even wages eventually) before we ever see markets crash. Anything but cash is better.

Thu, 07/10/2014 - 20:38 | 4945741 Julian
Julian's picture

just stfu and btfd

Thu, 07/10/2014 - 20:56 | 4945793 BLOTTO
BLOTTO's picture

Bubbles, 'Oh my fuck Boys, Its a Samsquanch'

.

http://www.youtube.com/watch?v=NL_SL73iNFE&feature=kp

 

Thu, 07/10/2014 - 20:39 | 4945748 Zeptemberalevin
Zeptemberalevin's picture

...........................................................................................................................................................POP

Thu, 07/10/2014 - 20:46 | 4945768 youngman
youngman's picture

and the only thing not in a bubble..are the PMs....were next to go baby...we should be...

Thu, 07/10/2014 - 20:50 | 4945776 Yen Cross
Yen Cross's picture

 Tyler, you're just insulting Z/H readers with this "click bait".

  Let's focus on rebuilding and IED's on bankster bunkers. jeese?

Thu, 07/10/2014 - 20:54 | 4945788 BobTheSlob
BobTheSlob's picture

Tiny bubbles...in my beer....

Thu, 07/10/2014 - 20:58 | 4945803 NoDebt
NoDebt's picture

"The Bank for international Settlements has warned that “euphoric” financial markets have become detached from the reality of a lingering post-crisis malaise, as it called"

I recall Alan Greensap saying that about 3 or 4 years before the .com bobble popped.  

Thu, 07/10/2014 - 21:00 | 4945806 lemosbrasil
lemosbrasil's picture

Dow Jones is very close , very close of hard hard hard correction....

There is a uptrendline very close to be broken...

see here: http://pracompraroupravender.blogspot.com.br/2014/07/acreditemdepois-de-...

 

Thu, 07/10/2014 - 21:13 | 4945860 NoDebt
NoDebt's picture

Trendlines have been broken for the last 5+ years REPEATEDLY, friend.  They mean nothing.  We're playing a giant financial game of "chicken" right now.  Whoever swerves first, loses.  Whoever fails to swerve in time, loses.  If they both do, both lose.  One way or another, everyone ends up in the ditch.  Just a matter of how far apart you think the cars are and how fast you think they're going.

Thu, 07/10/2014 - 21:16 | 4945866 lemosbrasil
lemosbrasil's picture

This time is differente...lol.....cause VXX has broken today a long downtrend line .....see here:

http://pracompraroupravender.blogspot.com.br/2014/07/intraday-de-150-pon...

Thu, 07/10/2014 - 22:26 | 4945941 Ben Ghazi
Ben Ghazi's picture

Not just the spacing and speed of cars on a normal road for investors to think about.

 

This road is multi-dimensional with cars coming at you from all directions and at different speeds.

Kind of like "Asteroids", with cars instead of space rocks.

Thu, 07/10/2014 - 21:10 | 4945852 caShOnlY
caShOnlY's picture

"she's giving us all she's got, Cap'n. If I push it any harder it will blow!!"

Thu, 07/10/2014 - 22:03 | 4945981 Ben Ghazi
Ben Ghazi's picture

"I must have warp speed at my Command by 1630 Mr Scott."

 

"I have Starfleet Fundraisers to attend in Dallas & Austin, North America Zone, Earth."

"No Lt Uhura, We're not going to the Neutral Zone Border, tell the Klingons to fuck off."

Thu, 07/10/2014 - 21:20 | 4945883 pachanguero
pachanguero's picture

Huge bubble here in Thailand, well all of Asia.  Japan will blow first is my guess

Thu, 07/10/2014 - 21:20 | 4945884 lemosbrasil
lemosbrasil's picture

I put a remark above about a uptrendline of dow jones....i said that Dow Jones is very close a hard correction cause a long uptrendline is close to be broken.....

But its necessary to say there is a long downtrendline of VXX that was broken today....

see here the uptrendline of dow jones: http://pracompraroupravender.blogspot.com.br/2014/07/acreditemdepois-de-...

now....see here downtrendline of VXX broken today: http://pracompraroupravender.blogspot.com.br/2014/07/intraday-de-150-pon...

 

 

Thu, 07/10/2014 - 21:50 | 4945931 Colonel Klink
Colonel Klink's picture

The Federal Reserve like Michael Jackson can blow bubbles as much as they want, I choose not to participate.

Fuck you Fed and Wall street!

EDIT:  Too soon?

Thu, 07/10/2014 - 21:52 | 4945968 DOGGONE
DOGGONE's picture

The Public Be Suckered
http://patrick.net/forum/?p=1230886

Thu, 07/10/2014 - 21:57 | 4945983 Buster Cherry
Buster Cherry's picture

Yeah, I've been hearing about these bubbles....for years now....

Thu, 07/10/2014 - 22:05 | 4946003 Ban KKiller
Ban KKiller's picture

How far down for how long? Will it interrupt the bread and circuses?

Thu, 07/10/2014 - 22:14 | 4946027 ramacers
ramacers's picture

quintessential bubbles will mean quintessential blood. 'bout right scenario.

Thu, 07/10/2014 - 22:18 | 4946039 I Write Code
I Write Code's picture

It just may be that this is not a bubble.

We've had all those bubbles since whenever, at least since 1991.

But maybe - just maybe - what Bernanke did, printing all these Bernankebux, is NOT a bubble, but a structured non-bubble, a neo-bubble, a bubble 2.0 that is not a bubble at all.

And that is sustainable.

Not without cost, TANSTAAFL, but yes sustainable, given current contexts.  HOW sustainable?  Well nothing lasts forever.  Especially the *discipline* to run this program will not last forever.  It invites corruption at the highest levels.  It very nearly *is* corruption at the highest levels.  But hey, the Dark Ages were "sustainable" for about eight hundred years, so wtf.

Thu, 07/10/2014 - 22:51 | 4946113 Bemused Observer
Bemused Observer's picture

You know what this market is like for me? It's like watching somebody blowing up a balloon too full, and you KNOW it's gonna pop, just not WHEN, and they keep giving it another blo, and you get all 'squinchy' and tensed up cause you KNOW it's gonna go...

Thu, 07/10/2014 - 22:57 | 4946125 Bemused Observer
Bemused Observer's picture

Stop calling it "bubbles"...Bubbles are fun, kinda carefree, and you can create hundreds by waving your bubble-wand.

It should be called the balloon...as in one entity getting pumped-up to impossible proportions. Everyone can relate to the tension of an ever-growing balloon...

Calling it a bubble makes it sound less serious. Well, whoever is in charge of the naming-thing, please get to it. And thank you in advance.

Thu, 07/10/2014 - 23:31 | 4946186 enforcer92677
enforcer92677's picture

 

 

Fri, 07/11/2014 - 04:38 | 4946497 Eirik Magnus Larssen
Eirik Magnus Larssen's picture

This is what Jesse Colombo has been saying as well. Incidentally, he is one of the few contemporary economists I take seriously, because he was one of very few who accurately predicted the great financial crisis as far back as 2006.

Fri, 07/11/2014 - 06:19 | 4946530 AdvancingTime
AdvancingTime's picture

Many of us the are far from optimistic. While the future is hard to predict, as in politics the people who watch and study the economy are becoming more polarized as to the direction of the economy. Many of us are slipping into one of the two distinct camps, one that sees this as an economy slowly on the mend with the worse behind us and the other who clearly takes the position that things are not working.

Not only have things gotten worse but the distorted economy and manipulated markets only mask the fact that a day of reckoning is fast approaching and we are facing a bigger and meaner economic set back then any the world has witnessed in modern times. More on this subject in the article below.

http://brucewilds.blogspot.com/2013/08/after-big-crash.html

Fri, 07/11/2014 - 09:58 | 4946882 Ghostdog
Ghostdog's picture

The best market signal is the Paul Krugmen penis erection barometer. When fully erect money is being burned in the street, when limp you can see rational policy. He is currently at 3 quarter mast, down from ready to blow 

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