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Let's build a bubble!
Old 03-17-2008, 03:52 AM   #1
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Let's build a bubble!

A financial bubble is a market aberration manufactured by
government, finance, and industry, a shared speculative hallucination and then a crash, followed by depression. Bubbles were once very rare—one every hundred years or so was enough to motivate politicians, bearing the post-bubble ire of their newly destitute citizenry, to enact legislation that would prevent subsequent occurrences. After the dust settled from the 1720 crash of the South Sea Bubble, for instance, British Parliament passed the Bubble Act to forbid “raising or pretending to raise a transferable stock.” For a century this law did much to prevent the formation of new speculative swellings.

Nowadays we barely pause between such bouts of insanity. The dot-com crash of the early 2000s should have been followed by decades of soul-searching; instead, even before the old bubble had fully deflated, a new mania began to take hold on the foundation of our long-standing American faith that the wide expansion of home ownership can produce social harmony and national economic well-being. Spurred by the actions of the Federal Reserve, financed by exotic credit derivatives and debt securitiztion, an already massive real estate sales-and-marketing program expanded to include the desperate issuance of mortgages to the poor and feckless, compounding their troubles and ours.

That the Internet and housing hyperinflations transpired within a period of ten years, each creating trillions of dollars in fake wealth, is, I believe, only the beginning. There will and must be many more such booms, for without them the economy of the United States can no longer function. The bubble cycle has replaced the business cycle.
Cont'd: "The next bubble: Priming the markets for tomorrow's big crash" by Eric Janszen (Harper's Magazine)

Well constructed and laid out viewpoint relating to bubbles - good reading!

Please let me know your thoughts.

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Old 03-17-2008, 03:57 AM   #2
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Can the next bubble at least wait until we dig ourselves out of the current hole we are in?

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Old 03-17-2008, 08:46 AM   #3
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Too late. The commodity bubble is already leaving the gate. Don't get left behind

Originally Posted by chinaco View Post
Can the next bubble at least wait until we dig ourselves out of the current hole we are in?
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Old 03-17-2008, 09:10 AM   #4
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My PCRIX is up 24% YTD...
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Old 03-17-2008, 09:29 AM   #5
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There already IS a bubble in commodities and basically anything that bets against the dollar.

There's almost always a bubble somewhere.
Originally Posted by HFWR View Post
My PCRIX is up 24% YTD...
So is my position in USAA Gold (USAGX).
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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Old 03-17-2008, 10:05 AM   #6
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Really good article. Thanks for posting.

I keep hearing the part, towards the end, that the next bubble will relate to alternative energy, etc. I wonder if it's already started. If you want to include all energy companies, it has.

"There's those thinkin' more or less, less is more, but if less is more, how you keepin' score?
It means for every point you make, your level drops. Kinda like you're startin' from the top..." "Society" - Eddie Vedder
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Old 03-17-2008, 01:46 PM   #7
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I think that there might be two bubbles - one definitely in commodities and one lurking underneath in alternative energy, as mentioned by the article. The alternative energy one is probably going to take at least 5 years to mature, but the commodities one can pop anytime during the next decade.

Seems to me that once those two pop, the States in for a depression. There are almost no other asset classes that can withstand a high level of investment - the investors from the housing, commodities, and alt. en. markets will be looking for a fresh place to dump their assets. This will inevitably create a huge new bubble(as mentioned in the article) but one that will pop faster.

Looks like a vicious never ending cycle.

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