More bubbles

[David Randolph]

This morning (at 0 dark hundred), Charlie Rose had a Wall Street short seller on his program talking about past times when the guy was able to short well (Enron, Lehman) and talking about the next bubbles. The short seller talked about how he saw China having a major real estate bubble and the hidden debt is in the government controlled banks. At some point, the bubble will burst and they will run out of ability to keep the real estate bubble going. He raised the idea that China will need to devalue their currency in order to survive.

That would cause a whole lot of problems.

What other bubbles do you see out there and when do you think they will pop? Will Wall Street pop now that TARP is over and the Fed is starting to back off?

[Origisaurus]

Residential real estate.  Once the subsidies stop, mortgage lending and hence buying will slow.

[DG9]

He raised the idea that China will need to devalue their currency in order to survive.

How do you see this impacting us?  Not saying it won't, just interested in opinions...

[The Gorn]

He raised the idea that China will need to devalue their currency in order to survive.

How do you see this impacting us?  Not saying it won't, just interested in opinions...

Wouldn't this inflate our currency relative to theirs, thereby resulting in a worse balance of trade gap? (IE, US denominated goods would become more expensive on world markets.)

[PhilFromNY]

What other bubbles do you see out there and when do you think they will pop?

Healthcare. Completely different than other bubbles because we are talking personal health instead of wealth but I believe in Stein's law: "If something cannot go on forever, it will stop". We can stop the continued increase in health costs by make sensible choices or we will stop it by going bankrupt.

When will it pop? I don't know but I expect by the 2012 elections.

[Aussie]

"0 dark hundred"

That pinged the ol' memory banks.  Haven't hear that expression since 1981.  Remember it was a C-141 Loadmaster who said it.  Didn't you guys retire the Starlifters recently ?

[Rastus P Shagnasty]

Yep.  It was retired a couple years ago.
Replaced by the C17 something or other.

[ArnoldW2]

The huge stock market run-up the past year is (as most of you have guessed) pure 100% bubble.  TARP and the Federal Reserve are the only things that pumped up the stock market.  That bubble may have a few more months to run, as there is a time delay between stimulus withdrawal and the "pop".  But I think that trying to profit from it now is risky.  It will end badly, just like the dot-com bubble and the housing bubble.

Here are two articles that (a) tell us how wonderful things are and (b) are actually contrarian signals:

Headline:  Only the most pessimistic forecasters predict a double-dip at this point.
http://www.theatlantic.com/business/archive/2010/04/dow-hits-11-000-but-still-in-recession/38790/

Headline:  How America pulled itself back from the brink—and why it's destined to stay on top.
http://www.newsweek.com/id/236190


Here's an article I tend to agree with:

Headline:  Wall Street's happy talkers making fools of 95 million investors (again)
http://www.marketwatch.com/story/new-dow-high-ahead-happy-talk-feeds-sheep-2010-04-13


Speaking of the housing bubble, that's only about half collapsed.  It will take until mid 2012 to finish.

Let's not forget about the coming commercial real estate collapse.

And, finally, lets not forget about the huge, worldwide debt bubble.  Governments around the world borrowed - and lenders loaned (and still are loaning) to them - as stupidly as anyone involved in the housing bubble.

I've read many articles about the Chinese real estate bubble.  There's a lot of disagreement as to how badly the collapse will hurt China.  Some say it will cause the Chinese economy to collapse.  Others say it will only be a temporary setback for China's inevitable rise to world economic domination.  I don't know which it will be, as I just don't know enough about China.

[Slinky]

Yep.  It was retired a couple years ago.
Replaced by the C17 something or other.

The C-141 was retired on May 5, 2006. My dad rode a lot of those when he was in the Air National Guard. He was in the medical first response team for the Caribbean. He also rode a lot of C-130s. I remember greeting him the second he stepped off these beasties as a kid. I keep hearing that they are replacing the KC-135s, but I haven't seen the new plane yet.

[David Randolph]

Part of the question has to be _how_ will China burst, what will be the trigger to bring down the bubble? I suspect that it will be the issue of corruption. Because China has been less transparent, there is the opportunity for more corruption in the institutions. So, which bank will be found to have been gutted by its management? How will that destroy the confidence in the institutions? What will it do to the political situation there?

If the Chinese currency has to drop, that will cause further political pressures in Washington DC as there has been talk of pushing China to raise the currency. Congresscritters have been under fire for their behavior and it is always easier to put the blame on an outside country instead of taking responsibility. If China can't take the blame, then we will have to hold Congress accountable.