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MASSIVE WORLD SPECULATION DOMINOS
Financial Sense University ^ | March 20th, 2006 | Christopher Laird

Posted on 03/21/2006 1:45:55 PM PST by Travis McGee

MASSIVE WORLD SPECULATION DOMINOS

by Christopher Laird

PrudentSquirrel.com

http://www.prudentsquirrel.com/

March 20, 2006

Last year, many Asian and other foreign stock markets went up as much as 50%. There is a synchronized world housing bubble that is a very analogous follow on bubble from the Japan collapses in the early 90’s, and the Fed loosening following 9-11.

We had the tech bubble crash in 2000/1, and a have now a general US stock bubble that is yet to really pop. Right now, we are about at the same DOW level before the market collapses in 2001/2.

There is a massive US and Japanese bond bubble because interest rates are so low, and have been for over ten years, at least from Japan’s perspective. Japan has acted as a virtual central banker for the world, with their zero interest rates. That has caused both a multi trillion dollar value Yen carry trade (borrowing cheap yen then lending the money in the US for example for a net gain of about 3%). The massive Yen carry trade has also financed much of the world stock bubbles as of this point. Also, that money has found its way into the world real estate market bubbles through various forms of mortgage backed securities. This list is endless for the Yen carry trade.

For bonds, in general there is a huge increase in risk taking because interest rates world wide are so low. Fixed income investors like insurance companies, mutual funds and individual savers have no choice but to send their hard earned money into the under priced bond markets. There is no other place to get ‘safe’ returns.

The ultra low US interest rates of late have created the huge US and world real estate bubbles, and these are all synchronized and are going to crash together within 6 months of a public/investor consensus that a pop in the real estate bubble has occurred. This public and investor consensus has not completely formed yet, but is now forming. Housing data is now coming out every week with very significant statistics that prove the housing bubble is cooling. With over 30% of homes in the last few years being purchased as second homes or investment/speculation properties, the now 6 months backlog of houses on the market is going to cause a rush to the exits for speculators. That will ultimately bring down the housing market all by itself, even if many people did wish to keep their overpriced homes for a few years.

There is an unprecedented derivatives atom bomb waiting to collapse. The derivatives outstanding according to the Bank of International Settlements (BIS) has grown from roughly $20 trillion of value in the early 1990’s to about $300 trillion now. The Fed and US banking authorities have had two meetings in the last year to address the fact that there is a very large percentage of these derivatives agreements that are not closing their paperwork within even a month of their creation! The Fed and other regulatory agencies are very concerned that the Banking industry cannot handle the volume.

Warren Buffett has stated that derivatives are weapons of financial mass destruction, due to their incredible leverage. Every year now, we hear of old time banks and new ones going broke in a day or two when a derivatives trade goes south for them. The recent victims are the Chinese petroleum procuring company that lost about $700 million in some air fuel hedges gone wrong. The trader responsible has been arrested, as I recall, and probably going to rot in a Chinese work prison.

I could talk about the Barings collapse, the LTCM collapse, and others.

What would happen if there was a real interlinked derivatives domino collapse and not just one affecting two or three banks only? A financial catastrophe of unimaginable scope.

Now I am going to stop here listing the dominoes that are all synchronized world wide, because my fingers are getting tired, and I don’t plan on typing all day and night to even to begin to list all of these. I just wanted to list enough to give you a good idea because:

All of these dominoes are going to crash together in a period of less than a year of each other and perhaps even within 3 months of each other! I’ll tell you why in a moment.

Also, at this juncture, I wish to say again that there is a big ETF mania going on in all financial and commodity realms. The hot ticket is supposedly hard asset ETFs, to include gold. Many investors are turning to ETFs because they are a hot new idea. Hedge funds and other speculators are pouring money into ETFs, and increasing volatility in the metals markets.

My point is that ETFs are a hot investing vehicle, but are not suitable to people who want to own metals for monetary and wealth safety reasons. For speculators, I suppose ETFs are fine. In fact, most of the activity in ETFs now are speculators anyway and they are not in them for the monetary reasons, but to obtain speculative gains. I go into this in more detail in a special ETF report out this week at the PrudentSquirrel newsletter.

To get back to the issue of synchronized global bubbles…

The issue at hand about the world stock, bond, and real estate bubbles is that they are all peaking together. They are all at historic highs. And they are all peaking at the same time in every nation on earth. Developed nation or not, many world stock markets had incredible gains in excess of 50% just last year!

That, combined with maturing real estate bubbles world wide, and the fact that bonds are at a high peak because interest rates have been so low mean that, when any one of these lets go, it will cascade into the other like markets around the world. That cascade in the like markets will lead to stampedes out of the other bubble markets as well.

Then we will see a massive financial collapse with all the synchronized bubbles world wide, real estate, bonds, stocks collapsing in one fell swoop.

This will not be just a national or regional collapse, it will be a total world economic collapse because all these bubbles are now synchronized.

Kondratieff studied bubbles of all kinds, from population growth to economic. He found that bubbles invariably rise until a catastrophic collapse. It is my view that we are in the last stages of a world synchronized Kondratieff bubble that has subsumed all of the world stock, bond, and real estate markets. The inception of the final stage of this bubble occurred in the 1990’s when Japan opened a decade long policy of zero interest rates. That money ultimately acted like a global central bank liquidity wave that has found its way into all world markets, and has synchronized them in conjunction with the tech revolution and the emergence of globalization. The US participation since 1998 and after 911 only heightened the process and magnitude. © 2006 Christopher Laird


TOPICS: Business/Economy; Foreign Affairs; Miscellaneous; News/Current Events
KEYWORDS: absolutetinfoil; buymygold; chickenlittle; doomedweredoomed; goldbuggery; goldgoldgold; goldshills; hideundertable; theskyisfalling
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1 posted on 03/21/2006 1:45:57 PM PST by Travis McGee
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To: Ancesthntr; archy; Badray; B4Ranch; Blood of Tyrants; CodeToad; coloradan; Covenantor; ...

Economic Ping.


2 posted on 03/21/2006 1:47:14 PM PST by Travis McGee (--- www.EnemiesForeignAndDomestic.com ---)
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To: Travis McGee
"World bubble"?

Hope can that be when there is no possible market arbitrage that is -- real estate has to be bought and sold where it is.
3 posted on 03/21/2006 1:47:35 PM PST by BenLurkin (O beautiful for patriot dream - that sees beyond the years)
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To: Travis McGee

We're doomed.


4 posted on 03/21/2006 1:49:25 PM PST by Lakeshark (Thank a member of the US armed forces for their sacrifice)
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To: Travis McGee

Christopher Laird: Bubble Boy?


5 posted on 03/21/2006 1:50:13 PM PST by Jeff Chandler (Peace Begins in the Womb)
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To: Lakeshark

6 posted on 03/21/2006 1:51:14 PM PST by vrwc0915
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To: Travis McGee

Didn't we hear these same doom and gloom prognostications of disaster in the runup to the Millenium? It didn't happen. Markets rise, markets fall. Markets move sidewise. Big deal.


7 posted on 03/21/2006 1:52:42 PM PST by Parmenio
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To: vrwc0915

Doomed I say......


8 posted on 03/21/2006 1:52:42 PM PST by Lakeshark (Thank a member of the US armed forces for their sacrifice)
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To: Travis McGee

We're Screwed!!!!!

DOOMED!


9 posted on 03/21/2006 1:53:09 PM PST by rlmorel ("Innocence seldom utters outraged shrieks. Guilt does." Whittaker Chambers)
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To: Travis McGee

"the now 6 months backlog of houses on the market is going to cause a rush to the exits for speculators."

Oh no, the inventory of houses for sale is returning to (gasp) NORMAL ... aaaiiiieeeee!!!


10 posted on 03/21/2006 1:53:46 PM PST by RegulatorCountry
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To: Lakeshark

Many are doomed. They just don't know it yet.


11 posted on 03/21/2006 1:54:01 PM PST by tomahawk (Proud to be an enemy of Islam)
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To: Jeff Chandler
Everything's just great! Why, the President and Sean Hannity agree on this point!

There is no problem ahead, none at all, because we're Americans!

"If recession should threaten serious consequences for business (as is not indicated at present) there is little doubt that the Federal Reserve System would take steps to ease the money market and so check the movement."

---Harvard Economic Society, October 19, 1929


12 posted on 03/21/2006 1:54:05 PM PST by Travis McGee (--- www.EnemiesForeignAndDomestic.com ---)
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To: Travis McGee

"I go into this in more detail in a special ETF report out this week at the PrudentSquirrel newsletter"


Prudent Squirrel???? So much for the Wall Street Journal I guess.


13 posted on 03/21/2006 1:54:05 PM PST by Dazedcat
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To: Travis McGee
Pop! Pop!


14 posted on 03/21/2006 1:54:35 PM PST by archy (I am General Tso. This is my Chief of Staff, Colonel Sanders....)
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To: rlmorel

Screwed, Blued and Tattooed...


15 posted on 03/21/2006 1:54:42 PM PST by reagan_fanatic (Darwinism is a belief in the meaninglessness of existence - R. Kirk)
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To: Travis McGee
My point is that ETFs are a hot investing vehicle, but are not suitable to people who want to own metals for monetary and wealth safety reasons.

And there's the money precious metals shot. I was wondering how long it would take him to tell me to buy big chunks of gold to hide in the back of my freezer.

16 posted on 03/21/2006 1:55:20 PM PST by KarlInOhio (The tree of liberty is getting awfully parched.)
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To: tomahawk
Many are doomed. They just don't know it yet.

In the long run, we're all DOOMED!

17 posted on 03/21/2006 1:56:17 PM PST by BeHoldAPaleHorse (Tagline deleted at request of moderator.)
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To: Travis McGee

Doesn't that chart show 1929 as only around 140%, and the spike occurring during the depression?


18 posted on 03/21/2006 1:56:30 PM PST by Anitius Severinus Boethius
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To: Parmenio
Markets rise, markets fall. Markets move sidewise. Big deal.

That's EXACTLY what folks were saying in 1929, and right into 1930.

19 posted on 03/21/2006 1:56:39 PM PST by Travis McGee (--- www.EnemiesForeignAndDomestic.com ---)
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To: reagan_fanatic

hehe, sorry. Just came back from the BUY YOUR SHELTER NOW TO PROTECT AGAINST THE 2006 GLOBAL WARMING MEGA HURRICANE DISASTER SEASON thread!


20 posted on 03/21/2006 1:56:52 PM PST by rlmorel ("Innocence seldom utters outraged shrieks. Guilt does." Whittaker Chambers)
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To: Travis McGee

The tangled web is frayed.


21 posted on 03/21/2006 1:56:52 PM PST by samcgwire (samcgwire was here today)
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Comment #22 Removed by Moderator

To: tomahawk

We are all doomed to something and we don't know it...:)


23 posted on 03/21/2006 1:58:11 PM PST by rlmorel ("Innocence seldom utters outraged shrieks. Guilt does." Whittaker Chambers)
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To: BenLurkin

[Hope can that be when there is no possible market arbitrage that is -- real estate has to be bought and sold where it is.]

I think it a stupid article regurgitating all the same stuff we always here when the American Economy is feasting. However, I did learn something and will think about and research it. How to trade realestate internationally?

Well, you would not sell and ship the realestate. However, consider this; If you take out a very low interest loan in a country whose enocomy is souring (Europe) and the value of their $$$ is dropping against the dollar, and you pay cash for a property in say the US which has an expectation of appreciation rate larger than the interest rate, what would happen? The property appreciates, you lease the property while you own it, and the sale of the property in say 5 years for US dollars allows you to clear some value after you repay the foreign loan. You make money on; 1) the property appreciation Vs. Interest 2) Hopefully the lease income pays the foreign loan 3) The value delta between the foreing currency and US currency after 5 years.

It's just brain puddy that leaked out, but I gotta research this. I never thunk it. It sounds cute.


24 posted on 03/21/2006 1:59:18 PM PST by Tenacious 1 (Not today.)
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To: Anitius Severinus Boethius

"Doesn't that chart show 1929 as only around 140%, and the spike occurring during the depression?"

It does. And, considering the intending meaning of this chart in context, I suppose some people think the Great Depression was a "good" thing, since the deficit as a percentage of GDP declined.


25 posted on 03/21/2006 2:00:06 PM PST by RegulatorCountry
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To: Travis McGee
Just have quick access to that "Sell All" button in your portfolio.
26 posted on 03/21/2006 2:00:35 PM PST by stevio (Red-Blooded Crunchy Con, American Male (NRA))
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To: BeHoldAPaleHorse
"In the long run, we're all DOOMED!"

That sounds a lot like J.M. Keynes philosophy, "in the long run, we're all dead." IOW, don't worry, let our grandchildren pay for our debts, we'll be dead, so who cares? Our grandchildren can deal with it, screw them, we'll be dead!

27 posted on 03/21/2006 2:00:42 PM PST by Travis McGee (--- www.EnemiesForeignAndDomestic.com ---)
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To: Travis McGee

Someday one of these doomsday scenarios might come true. However, none have done so, at least since 1929-33. These scenarios are the economic equivalent of global warming. As someone said of a "hard money" advocate 25 years ago, "He has predicted 11 out of the last three recessions."


28 posted on 03/21/2006 2:01:00 PM PST by Wallace T.
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To: Travis McGee

It was a play on Keynes' words, but it expresses an underlying truth. The Universe started with a Big Bang; it will end in a Big Crunch. In short, we're DOOMED!

I don't support fiat money. I support Ferrari money.


29 posted on 03/21/2006 2:02:30 PM PST by BeHoldAPaleHorse (Tagline deleted at request of moderator.)
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To: Wallace T.

"He has predicted 11 out of the last three recessions."

Fuzzy math?


30 posted on 03/21/2006 2:02:56 PM PST by Tenacious 1 (Not today.)
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To: BeHoldAPaleHorse

I'd prefer not to squander our legacy, and not hand our grandchildren lifetimes of poverty, trying to dig out of the hole we put them in.


31 posted on 03/21/2006 2:05:26 PM PST by Travis McGee (--- www.EnemiesForeignAndDomestic.com ---)
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To: Travis McGee

Let them mock and laugh time will tell.
I hope their paper money keeps them warm and well fed


32 posted on 03/21/2006 2:13:03 PM PST by vrwc0915
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To: Parmenio
Didn't we hear these same doom and gloom prognostications of disaster in the runup to the Millenium?

Yeah, and they were right. Unless you don't consider a 70% drop in tech-weighted 401Ks a disaster.

33 posted on 03/21/2006 2:15:31 PM PST by steve86 (Acerbic by nature, not nurture)
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To: Travis McGee

"and a have now a general US stock bubble that is yet to really pop. "

Yeah great grammar here - these guys cannot even conjugate a sentence and we are supposed to take their financial advice


34 posted on 03/21/2006 2:22:40 PM PST by DM1
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To: RegulatorCountry
"And, considering the intending meaning of this chart in context, I suppose some people think the Great Depression was a "good" thing, since the deficit as a percentage of GDP declined."

Same for Carter. Trump once said on LKL that looking back, that late-70s period was not just a severe recession but a Second Depression.

And how did Carter fubar America? Suppressing ND as a fetish; choking off M1; and strangling growth through high interest rates.

35 posted on 03/21/2006 2:25:45 PM PST by StAnDeliver
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To: DM1
"and a have now a general US stock bubble that is yet to really pop. "

Yoda has turned to financial advising. The gold side of the force recommends he, hmm.

36 posted on 03/21/2006 2:29:19 PM PST by KarlInOhio (The tree of liberty is getting awfully parched.)
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To: Travis McGee

Oh, sorry. Thought this was a thread about pizza.


37 posted on 03/21/2006 2:30:29 PM PST by Cyber Liberty ( 2006, Ravin' Lunatic since 4/98)
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To: Travis McGee

Hundreds of people warned about the coming nazdog crash, and not many people listened. I know people who are still digging out from that bubble bust.

I have a neighbor who bought a bunch of property 5 years ago that abutts mine. He tried to subdivide and sell parcels. Few takers. I asked what he wanted for a couple of parcels abutting my western border. When he mentioned the price, I told him to give me call when he comes down from orbit.

Everyone wants to be an instant millionaire. I suspect I'll be buying his property - soon - at 25 to 30% of his asking price 5 years ago.


38 posted on 03/21/2006 2:31:00 PM PST by sergeantdave (The business of business is none of the government's business)
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To: Tenacious 1
"He has predicted 11 out of the last three recessions."
Fuzzy math?

No, binary! He's 3 for 3 (or rather 11 for 11).

39 posted on 03/21/2006 2:31:56 PM PST by usapatriot28 (There are 10 types of people in the world, those who understand binary and those who don't)
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To: Travis McGee

No, actually it isn't and all the revisionist history, you and others post, wont make it so!


40 posted on 03/21/2006 2:37:40 PM PST by nopardons
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To: BearWash

Well, my 401K wasn't tech weighted.


41 posted on 03/21/2006 2:37:44 PM PST by Parmenio
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To: Cyber Liberty
Oh, sorry. Thought this was a thread about pizza.

I'm game.....

My secret for a great home-baked pizza is a 550 degree oven.

10 minutes tops...

I'm making some tomorrow night...with shrimp, mushrooms, onions and bacon.

42 posted on 03/21/2006 2:39:34 PM PST by CROSSHIGHWAYMAN (Toon Town, Iran...........where reality is the real fantasy.)
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To: CROSSHIGHWAYMAN

You have a pizza stone, I presume at 550?


43 posted on 03/21/2006 2:45:41 PM PST by Cyber Liberty ( 2006, Ravin' Lunatic since 4/98)
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To: Travis McGee

Travis McGee;
You don't have to worry, when your funds run low, just take off on The Busted Flush and find a fair maiden that you can rescue. She will be so appreciative, she will fund you for the next piece of your retirement.


44 posted on 03/21/2006 2:56:52 PM PST by oldtimer2 (Yes I am the center of the universe. (msm attitude))
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To: Travis McGee; BeHoldAPaleHorse
"In the long run, we're all DOOMED!"
That sounds a lot like J.M. Keynes philosophy, "in the long run, we're all dead."
We the people of the United States, in order to . . . secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America.
When you reckon that "we" includes our posterity, the statement "in the long run, we're all dead" is false.

Indeed, in terms of the economic debate in which Keynes was then engaged, it is not even necessary to appeal to posterity in order to rebut it. Experience is that things which economists say will happen "in the long run" usually are well under way within half a year.


45 posted on 03/21/2006 2:57:27 PM PST by conservatism_IS_compassion (The idea around which liberalism coheres is that NOTHING actually matters but PR.)
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To: conservatism_IS_compassion
When you reckon that "we" includes our posterity, the statement "in the long run, we're all dead" is false.

The latest findings in cosmology say otherwise; the Big Crunch will be the ultimate end of our progeny.

46 posted on 03/21/2006 3:01:12 PM PST by BeHoldAPaleHorse (Tagline deleted at request of moderator.)
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To: Travis McGee

Howard Ruff is scheduled on Coast Thursday.


47 posted on 03/21/2006 3:05:40 PM PST by RightWhale (pas de lieu, Rhone que nous)
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To: BeHoldAPaleHorse
The latest findings in cosmology say otherwise; the Big Crunch will be the ultimate end of our progeny.
Yes; indeed the Bible would tell you that as well. But that hardly justifies the abandonment of our own children - say nothing of ourselves, in actual fact - to the tender mercies of crackpot economic panaceas.

48 posted on 03/21/2006 3:08:10 PM PST by conservatism_IS_compassion (The idea around which liberalism coheres is that NOTHING actually matters but PR.)
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To: Travis McGee

Econ mark.


49 posted on 03/21/2006 3:09:20 PM PST by Alia
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To: Lakeshark
We're doomed.

Unless of course you sell EVERYTHING you own and buy gold... lol!

50 posted on 03/21/2006 3:16:34 PM PST by AmericaUnited
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