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.
Didn’t answer my question.
How do you square a belief in limited government with a government that tells you where you can do business?
Or for that matter with a free market economy?
I put America’s government, before a free government.
America’s government competes on the world stage with China’s government, with Russia’s government. Venezuelas’s government. Chile’s government.
Cuba’s government. Germany’s government. Japan’s government.
The world is full of foreign governments, and each is competing as an independent unit against the American government.
Except our own government.
Both our parties, are selling out America as fast as is humanly possible.
Scr@w that I say.
Bring back US jobs.
There was no possible way income increases could’ve kept up with the rise in housing prices. When lenders/govt stepped in with their specialty cocktails to extend the housing party (think subprime), it was only a matter of time before “last call” was given.
The hangover was well deserved.
I find it hard to read the word “epic”, without thinking of this:
The housing market had nothing to hold it up so it crashed.
Just like the stock market today. Nothing but froth. Not a good place to be.
That is like asking the fox for reasons why he should be allowed to guard the hen house. I’m not saying that every job exported is indeed bad, but it should be clear by now that with over a reported 20 million people unemployed there is a problem, and though Obama policies suck he’s not the only one to blame. America has been ransacked for the betterment of a chosen few. By the way there is nothing that pees me off more than to have to talk to a foreign customer service person that: one you can’t hear (low volume) and two, you can’t understand broken English. :)
since there is absolutely no way to pay our nation's debt of $17 trillion, or to sustain a trillion dollar operating deficit every single year, you are correct.
Zippy and the Dems are willfully doing a Cloward-Piven on our own government, and they are on track for a collapse by early 2014, just in time for the mid-term elections. A crisis will develop, be blamed on the GOP, and the Dems will coast to power.
Someone wake the frigging GOP up.
Yesterday I visited a company that manufactures and then exports very sophisticated mining equipment. The equipment utilizes sensors and various components manufactured elsewhere.
The customer demands good stuff that will endure the rigors of the isolated mines. the Americans know what is best and incorporate into the total. The Americans I saw yesterday were filling the two year spare parts inventory order from the foreign miners. Included were parts they made, parts from France, Brazil and Korea. (and possibly other countries)
Monday I will visit an America company that manufactures a component for a water desalinization plant being constructed for Gulf Arabs that is designed and constructed by a very large and well known Japanese company. The language of the transaction is English and the engineering and approvals procedures are basically American. Many of the referenced specifications and standards are ASTM. The order will be in process 24/7 for 6 months. There are many very diverse jobs involved in the order, including my own.
On Wednesday, as I do every Wednesday I will visit an American company ( in Roanoke BTW) doing much the same thing fabricating to it’s own designs using American and some imported components. The process also takes around 6 months after final design is approved. The export involves loading the 100,000 pound equipment on a very very large trailer and a period of nearly three weeks on the road to Vancouver. There are some imported instruments and process devices but there are several American subcontractors involved as well.
Last Friday I visited an American company that manufactures cable. They were shipping custom made and sophisticated designed cable to a project off shore in Nigeria. Their knowledge, expertise and ability were required. Again, the engineering process and procedure are in English, ASTM IEEE specs, and American procedures.
The points are that America is doing what it does best, designing what the world needs and manufacturing what is economically feasible. The task is being accomplished using purchased items necessary that are the best that can be found, American or foreign made. Although cost is a factor, excellence is the controlling factor.
Lastly, we live in a global economy where instant communications allow unprecedented purchasing ability to source and procure what ever is needed to best solve a problem. Those who provide the best at the best price will prevail. Although Stanley tools from yankee land might seem desirable, the Stanley screwdrivers made in China will prevail. Connecticut is no longer competitive in price or quality.
Thanks for that thoughtful reply.
I still think we need to become far more pro-American.
We rode the “globalization” thing to it’s logical extreme.
If we had a linited gov’t all the labor laws, environmental regulations, tax codes, unions, etc. that drives business overseas wouldn’t be so onerous and I’m sure American companies would prefer to make things here if it would be profitable to do so.
Artificially driving down the price of borrowing clearly leads to malinvestment and a long term decline in our standard of living.
Write on the blackboard 100 times, “Free markets do not lead to inflection points.” When you see an inflection point, you know that it is the result of government action.
Parties do not export business, Business leaders do. The parties make business impossible, so it goes elsewhere. Almost the same thing, but just enough off to miss the mark. The EPA rules, and mountains of government paperwork and oversight that is increasing in America make it impossible to create goods with any competive edge. Where the American worker may produce twice or more the goods per dollar spent, the government wasted many times that forcing you to inventory beans for them to count, and make expensive modifications to reduce already clean air polution.
Meanwhile, China builds dirty coal plants left and right to take advantage of the cheap coal than Americans can’t buy.
-——We rode the globalization thing to its logical extreme.-——
It has only just begun
The 'conservative' approach was has been to keep and maintain tariffs and other benefits for local production.
The end result of globalization and wage arbitrage is that American wages will stop increasing, while 2nd and 3rd world countries will rise. One does not have to be Ross Perot to see that.
Secondly, our trade policies hurt local production. A prime example is simple Reciprocity. We don't use it. A surfboard made in California will be slapped a tariff on by the Taiwanese, while a Taiwanese surfboard comes in duty free.
In the long run we need jobs. There won't be many to come in the future. I'm realizing that the 'middle' class was a short, and odd occurrence that will eventually be washed away.
With the coming importation of millions of illegal aliens and advances in technology that destroys manhours we will see less and less jobs required or needed, and at wages that will be less beneficial.
Houses here have gone up 50% in the last 4-5 years. People are being taxed out of their homes and the lib commie CA imports are wrecking everything.
OK, so it is time for prudent Freepers to reduce their bank balances.
What to do with your cash? Some PMs may be a good investment, but I have a few other suggestions.
Every action/investment should make you:
Healthier. Maybe a small garden for home grown veggies? Fruit trees? Exercise equipment? Better air filtration for your home?
Get those medical tests done that you have been putting off?
BTW, last year I paid for some medical tests that my provider would not cover. It turned out I had a life-threatening problem that would have killed me within two years! Surgery fixed it. I was both prudent and lucky. More plastic and metal parts for old darth.
Safer. A larger, safer vehicle? Alarm or a camera system for your house or business? Concealed license along with a better firearm and some training? Money turns ammo into skill!
Spend your money on preps that you will use. I like Jack Spirkos philosophy about preps that make your life better now. You can find Jack at www.survivalpodcast.com Love his shows.
Richer. Get out of debt FIRST!
Invest in a sideline business? Buy some farmland or rental property? Learn some skill that will always be in demand such as welding?
Right now I think the markets are incredibly risky, not to mention rigged. So traditional stocks, bonds, etc. are too dangerous.
The best investment is something YOU have total control over such as a business no matter how small.
The US is stepping all over itself to halt any development of natural resources, which is the basis for all real new wealth creation. I our area, there has been a systematic shutting down of timber, geothermal, mining, and now ranching and farming endeavors. It is a shift to imports for all our raw materials. Since new wealth is created from the mixing of labor and ideas with natural resources, the U.S. is intentionally cutting its own throat to reallocate wealth to the third world.
His father's Dream.
We also had a contingent of Wall Street buttsniffers here who were all in favor of TARP. Probably some of the same people. They don’t post much any more.
theoria, great points. And what bert posted also makes sense too along with the poster who basically was saying you can’t force business to stay here. All points are true.
But Cringing is also correct. Nothing good for the overall US lifestyle/health comes from outsourcing or insourcing. Sure, wealth will still be made. But one thing that escapes most (or is ignored); who the heck wants to live in a crumbling society.
Iron bars around residence, armed private security. Awesome, sounds great. Let’s welcome crime and live like some do in South America. Because that’s where this Country is heading. No sense arguing about all this, it’s inevitable.
That is exactly what is happening. The ideologues at EPA are creating so many rules, regulations and restrictions that capitalistic entrepreneurship is being restricted and the creation of real wealth and true prosperity is being severely inhibited. Obama borrows or prints a million dollars, hires ten non productive bureaucrats and thinks he has accomplished something. America is suffering. Obama is a fool. The creation of real wealth historically has the greatest correlation with the establishment of real social justice.
“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. “
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
Investors were hardly “totally blind.”
Stop giving credibility at that point. Markets always have risks, and the only one’s blind are basically negligent, regardless of “the government” or any other scapegoats involved.
That is epic.
Protecting our borders and erecting tariffs were some of the first things that the FIRST congress did. Washington signed the first US Tariff Bill in 1790.