Can We See A Bubble If We're Inside The Bubble?
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
We want this time to be different so badly, we can almost taste it.
If you visit San Francisco, you will find it difficult to walk more than a few blocks in central S.F. without encountering a major construction project. It seems that every decrepit low-rise building in the city has been razed and is being replaced with a gleaming new residential tower.
Parking lots have been ripped up and are now sprouting condos and luxury rental flats.
The influx of mobile/software tech into the S.F. Bay Area has triggered not just a boom in tech but in all the service sectors that cater to well-paid techies. This mass of new people has created traffic jams that last virtually all day and evening, and overloaded the area's BART transit rail system such that trains at 11 pm are as jammed as any during rush hour.
This phenomenal building boom is truly something to behold, as it has spread from S.F. to the East Bay as workers priced out of S.F. move east across the Bay, driving up rents to near-S.F. levels.
This is of course a modern analog of the Gold Rush in the 1850s, and the previous tech/building boom in the late 1990s: an enormous influx of income drives a building boom and a mass influx of treasure-seekers, entrepreneurs, dreamers and those hoping to land a good-paying job in Boomland.
The same phenomenon has been visible in the Oil Patch states every time oil/gas skyrocket in price.
We know how every boom ends--in an equally violent bust. Yet in the euphoria of the boom, it's easy to think this one will last longer than the others.
I distinctly recall the mass excitement of COMDEX in 1999, the big computer-tech trade show in Las Vegas. The city was packed, the convention centers were packed, and an enormous banner announcing the then revolutionary slogan "the network is the computer--Sun Microsystems" welcomed the faithful.
I saw Bluetooth demonstrated for the first time in that show (at a Motorola booth), and dozens of other consumer technologies that never quite caught on--kits to turn your PC into a TV, etc.
A year later the bubble had burst, and a decade later Sun Micro had lost its edge and would end its glorious run in the ignominy of being sold to Oracle for pennies on the dollar.
Rents in San Francisco are now so obscene that there is even a parody in which Hitler tries to rent a flat in S.F.
Across the Bay in Oakland, new relatively large 1-bedroom flats with Bay views are asking $3,300 a month. The same flat in S.F. would fetch $4,000 or more per month. Techies working for free on a buddy's start-up have famously rented the space beside the washing machine in a laundry room for $400 a month.
How many average workers can afford to pay $40,000 a year in rent? After taxes, even techies earning $80,000/year would have little to show for their labor once they paid $40K after $20K in taxes and deductions have been subtracted from their annual wage.
The current Gold Rush will collapse, and as the newly fired marginalized workers pack up and leave, nobody will be renting the flats for $4,000/month. The owners will try reducing the rents to $3,000/month, and with no takers, they will go bust and the gleaming towers will be auctioned off. Eventually rents will decline to what people can actually afford.
This process will take a few years, as owners are reluctant to accept secular declines in rent and the resulting insolvency. Restaurants and other secondary businesses that arose to serve the techies will hang on, paying insane rents, for a few months and then give up losing money and close.
We naturally cling to the euphoria and glory of a boom; they generate such hope and positive emotions. The bust is no fun at all, a slow cascade of layoffs, insolvencies, moves to cheaper and far less exciting locales, busted dreams and all the mourning that accompanies the shattering of dreams and hopes.
Knowing all this doesn't prepare us for the bust, any more than the initial signs of a boom prepared us for the bubble. We want this time to be different so badly, we can almost taste it. But this time is only different on the margins; the flavor of the bust remains the taste of ashes.
(3 votes)
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If a stock collapses in a forest and Gartman does't see it....did it happen?
It's a Trap!
"Can we see a bubble if we're inside the bubble?"
Only if we wish to see the bubble. Denial isn't necessarily a negative emotion when used to see only the positive.
Until, of course, it is.
Damnit I tried to come up with a good 'De Nile' joke and failed miserably. Sigh.
Nobody really gets 'paid' to see a bubble (unless they are content to simply eeek out a meager existence in the mezzanine section with a crowd of other wannabees & 'I told u so's').
Sheeple prefer LIES to TRUTH... Telling the truth only earns you a free lifetime supply of tin foil.
it's true of way more than bubbles - I figured out something early in my career: in the entire history of capitalism no cube dweller has EVER been rewarded for being right about someone in a corner office being wrong...
what we need is a BIGGER BUBBLE to contain this. I vote we bring in JJ Abrams and tell the world we have been invaded by another planet and we are now part of the interestorial monetory fund and our planet has been listed on the Milky Way Stock exchange as a junk bond.
We're gonna need a bigger bubble...
How about if every living resident of the US got a house?
Banksters like it.....
Just as all is well until the day it isn't, Hey ? This article is a minimum 10 yeras late or out of synch with any truth or realization. Par for the course these days I suppose since the majority still live in massive illusions.
+++
Been way too long General...
The universe is a bubble.
Kits to turn a PC into a TV DID catch on, in the form of DVRs provided by cable and satellite companies. Those are pretty much the same technology but made much less costly. Also, Windows Media Center has continued on since 2005 at least to Windows 7. All you need to do is connect a tuner and Windows Media Center provides DVR functionality. You can even buy remote controls similar to your standard run of the mill universal remote. This can be a great way to repurpose old PC hardware.
The grizzly bear is fierce and wild
He has devoured the infant child.
The infant child is unaware.
She has been eaten by the bear.
A E Houssman
did we not just discover gravitational waves???
Well.......SF is different and it will likely do better than most places, because of the difference. The rush to Portland might be a little more of a bubble but both places have real money (vs debt) going there.
So why do people with real money have massive mortgages and negative total wealth?
This time its a bubble thats comming loose from reality and is flowing away in the wind
And nobody cares
The very point of bubbles is to profit on both ends of anti-freemarkey monetary madness.
But i wouldnt worry too much about RE in major west coast cities. They still arent making any more land, while they are, it seems, making more of just about everything else.
Flyover WA, OR and CA at night. Its mostly empty.
"The bust is no fun at all, a slow cascade of layoffs, insolvencies, moves to cheaper and far less exciting locales..."
Uh...
It ain't gonna be no 'slow cascade of layoffs' this time around Charles 'ole buddy... Shit's gonna get real, and when it does it's gonna get real, real fast.
"I AM the bubble!" ~ the Fed
Here are some signs of a coming recession.
1. Investors in high-yield bonds are expecting to see their first negative return since the start of the credit crisis in 2008.
http://www.marketwatch.com/story/deteriorating-junk-bonds-flash-warning-signs-for-stocks-2015-12-07?dist=afterbell
2. Factory orders continue to drop
http://www.zerohedge.com/news/2015-10-02/us-factory-orders-flash-recession-warning-drop-yoy-10th-month-row
3. Default risk spikes
http://www.zerohedge.com/news/2015-10-02/us-financials-default-risk-spikes-2-year-high
4. M&A set record
http://michaelekelley.com/2015/05/29/mergers-and-acquisitions-set-record/
5. Iron ore prices tumble
http://www.marketwatch.com/story/iron-ore-prices-keep-crashing-adding-to-global-growth-fears-2015-11-30
6. Baltic dry shipping index tumbles
http://www.marketwatch.com/story/shipping-index-falls-to-all-time-low-stoking-fears-about-global-growth-2015-11-19
Here is how to prepare.
http://michaelekelley.com/2014/10/16/8-things-to-do-when-recession-happens/
Here is how to get your mind off this stuff.
http://michaelekelley.com/category/humor/
Good luck!
Bubble or Inflation, it's the same shtick, the only difference is the angle your holding it at.
Double, double toil and trouble;
Fire burn, and cauldron bubble.
Real estate is beginning to burp again in FL outside of the Miami/Ft. Laud/West Palm corridor (random searches on Zillow over the past 6 months show middle to high end foreclosures increasing and prices being slashed on "normal" homes). It's only a matter of time until the whole House Of Cards gets blown away again.