The Difference Between the Technology Bubble and the Housing Bubble? Who Ended up the Bagholder
A key theme I have harped upon for a long time is that the technology bubble went bust and hardly anyone missed a beat. Certainly no heroic efforts were attempted by the FED to help anyone. Just low rates to encourage new speculation. The housing bubble bust has been fought on all fronts. What is the difference? The big banks had unloaded their dot bomb shares on other people were as now they themselves sit on all the losses, or the losses that do not currently reside at the FED, HA!
Jesse's Cafe of course writes this up in a way that makes me jealous, so I will just point you that way with a small excerpt:
Is the FED Likely to Act if There is Another Stock Market Bubble?You should read the whole thing.
The 'collateral damage' caused by the dot.com and housing bubbles, all those ruined lives and families, is really not a problem and can be addressed by monetary policy (inflation) after the bubble runs its course. The problem in this last financial crisis is that the housing collapse caused a bank run, and the banks themselves were injured, instead of profiting, in the bubble collapse. Talk about an unintended consequence. Good God, not the Banks! This is a fast being remedied by the enormous subsidies granted by the Fed, and their man Timmy at the Treasury, to set the Banks back up again at the roulette tables, bringing home those eight figure paydays.
Oil Nearing $90; Good Thing the Economy has Recovered
Funny headline at Clusterstock:
Holy S&*# Oil!
I seem to remember quite a few banks loading up tankers with oil a while back, it was January of 2009:
Banks Cannot Let Go of the Gambling Mindset
Which was centered on this Bloomberg item:
Goldman Sees ‘Swift, Violent’ Oil Rally Later in Year
I wrote at the time:
The process of filling a supertanker with oil and planning on selling it later at a higher profit sounds great as long as those "higher prices" manifest themselves. Was it not the banks like Morgan Stanley and Citigroup that were so sure "higher prices" in real estate were such a sure thing? Good to see taxpayer funds going to work on a commodity bet. I am sure this will work out well.Well it looks like a winner but it took a bit longer!
I would say higher fuel prices may not be the shock to the economy it once was; when no one has a job there is much less driving! How's this for a bumper sticker:
Unemployment: The New Green Revolution!
Bond Rates Moving Up
While some writers (Calculated....) were high fiving the day after the FED MBS program ended because rates did not move up in one hour, it seems as time goes on the slow rise is gaining steam (via Market Ticker):
10 Year Bond Breakout!
Most bulls see this as proof positive the economy is on fire so this remains bullish for now.
Of course you have to love the idea that the government tempted a large number of home buyers into the market at all time low rates, gave them $8-$10k towards a home purchase, and expanded FNM/FRE/FHA loans to any and all. Now, looking out maybe 1 year, higher mortgage rates will make those buyers instantly underwater! This would be funny if it was not so sad.
Metals Make the Mainstream
You things are getting interesting when metal market commentary makes sites like The Huffington Post:
It's Ponzimonium in the Gold Market
Writer Nathan Lewis (who wrote "Gold: the Once and Future Money (2007)" which I have read) discusses the paper market and how that market vastly exceeds the physical gold market. This story is a great recap of all the crazy developments in metals over the past few weeks, including a hit and run perpetrated on a whistle blower not 2 days after his report was published.
As for the metals, my favorite, things are looking good.
Silver closed above $18 an ounce today and that is very strong. When silver was around $15 in February I was chomping at the bit to get some. I did not do any trades via the regular vehicles (SLV, miners, etc) but I could not pass up a deal on some physical to add to the Economic Disconnect holdings. Near term silver is bumping resistance at $18-19. Any break over $20 could be a big one so I will be watching this space.
Gold has not been as exciting, and my target of $900-$950 for accumulation looks to be dead at this time. Gold has been solid and the $1200 an ounce mark looms as resistance.
Have a good night.