Skip to comments.Bubble bigger than housing about to pop
Posted on 03/30/2013 5:22:09 AM PDT by SeekAndFind
The most devastating market events are those that no one sees coming.
Take what happened to Lehman Brothers in 2008, for example. Up until the last minute, virtually no one could have imagined one of the country's leading investment banks would file for bankruptcy. The housing market crash was the same way. The Street believed housing prices would never go down.
With the market totally blind to the growing risk in each investment, anyone who had investments in housing or with Lehman Brothers suffered huge losses.
Despite these tough lessons, there is now another epic bubble developing and the market is ignoring this one too.
In fact, this bubble is so big, the 2006 housing bubble and the 2000 bubble pale in comparison. And when it pops, it will hit the most conservative portfolios the hardest.
While investors were burned by big losses in 2008, risk-averse investors have been flocking into the safety of Treasury bonds. In just the past four years, investments into bond mutual funds have doubled to $4 trillion. But this perceived bastion of safety is more like a ticking time bomb waiting to explode. And when it does, it will devastate any portfolio with a heavy allocation to Treasury bonds.
Here are four reasons it's time to sell Treasurys.
1. Risk and reward The best reason to abandon the bond market is a simple matter of risk and reward.
With the U.S. Federal Reserve beating yields into the ground in the past four years, the risk-reward ratio in the Treasury market is terrible. If the yield on the 10-year Treasury note fell to zero from its current 1.9%, then bond prices would rise about 17%, according to Timely Portfolio. On the other hand, if the yield grew 2-3%, bond prices would fall about 20%.
(Excerpt) Read more at money.msn.com ...
Oh please. Let’s all buy STAWWWWWKS.
Uncle Ben will save us...
Just print more money as a way to prosperity.
I can’t believe no one in the history of the world has never thought of this.
The current rise in housing prices is due to the same financial phenomena causing the rise in equities. Nervous euro holders are converting their wealth into dollar denominated investments, stocks and US real estate, and excessive money printing rises prices. However there is no corresponding real increase in true value since real wealth is not being created. Like the proverbial house of cards,all will fall down yet again.
Yep. There is too much “money” as opposed to wealth out there.
So the money goes ceaselessly chasing safe havens of investment. The haven of the moment by definition therefore creates a bubble, which bursts when the money decides to flee to a new haven.
The problem is that in such a world there is not and cannot be a safe haven that will maintain the value of the money. Inflation WILL take place to return a balance between the amount of money and the amount of “stuff.”
And the longer that accounting is postponed by gimmicks, the worse it will be.
Both parties need to stop exporting our production, and bring back American factories to give Americans jobs.
Both parties have sold out America.
I believe the first one to turn back and protect America first, will win this contest.
Who will it be?
There is another bubble, that is ammo.
This bubble is at or near the peak. It is the haven of the moment for many feeling the need but lacking the means to invest in Treasuries.
BTW, if you don’t sell, the money is safe until redemption. The problem is inflation and the steady devaluation of the US$
The reality is that we live in a global economy where instruments built into exported American made machinery are sourced from Brazil and Korea. The global effort makes the world go ‘round
My opinion on that changes daily, sometimes hourly. I feel like a yo yo.
This is absolutely 100% unadulterated BULL***T.
I knew housing was heading for a fall in 2004 when I saw homes in my neighborhood going to $500K from $200K just three years earlier. Prices that -no one- who lived there at the time could ever afford without a suicidal mortgage.
Lots of others saw it coming too.
The Street knew that housing prices would crash, and that its friends in Washington would step in to stick taxpayers with the tab.
If and when “American factories” come back, they will be using American robots, supplanted by perhaps one-tenth the labor force they did back in the ‘50s - ‘70s.
I am 100% for that.
Just stop importing everything.
My point is that devaluation the USD and most if not all other currencies is not only unavoidable, it is utterly necessary.
The problem is that every day fewer Americans benefit from that belief. Only those at the top fully benefit from exporting American jobs to other countries. If we don’t wake up soon and realize that there is a great benefit to being loyal by keeping jobs here in the US, we will become the 2nd or even 3rd world countries of the past.
If American companies were forced to return their factories to America, it would result in relatively few new American jobs. The much higher cost of labor here would primarily mean that companies would invest in automation wherever possible.
BTW, how does “limited government” square up with forcing businesses to open factories where the government wants them to?
There are some things you and I will generally disagree on.
Trade is one of those.
I accept my view is still a minority view. But I hold it more strongly, every single day.
We are giving away the very thing, which has made America strong.
Recently worked a project in the Caribbean for a company that “nearsources” customer service (actually collections) for several large US companies.
I discussed this issue with the manager, who is American. His POV is that nearsourcing benefits both the host country and the US. That exporting these low-wage, low-skill jobs is a lot easier on the US economy than importing the people to fill them in the US. If they immigrated and did the same job in Cleveland, they would consume a lot more American resources than they return to the local economy with their low incomes.
They knew, many knew. The Dems in Wash-DC knew it and planned to blame Bush for it (that worked). Frank and Dodd refused to do anything on their respective committees in House and Senate, deliberately. Guess who retired right after, Frank and Dodd. They got their "pay-out". This was a crisis brought by the Fed-Gov as the mob boss and all the capos made there money.