First iceberg: Global assets bubble warning

From The Economist: "Bubble Warning: Why Assets are Overvalued ... Markets are too dependent on unsustainable government stimulus. Something's got to give ... The effect of free money is remarkable. A year ago investors were panicking and there was talk of another Depression. Now the MSCI world index of global share prices is more than 70% higher than its low in March 2009. That's largely thanks to interest rates of 1% or less in America, Japan, Britain and the euro zone, which have persuaded investors to take their money out of cash and to buy risky assets ... cheap money is driving up asset prices."

Sounds as ominous as The Economist's warning back in June 2005, two years before the last meltdown: "The worldwide rise in house prices is the biggest bubble in history. ... Rising property prices helped to prop up the world economy after the stock market bubble burst in 2000." Values increased 75% worldwide in five short years. "Never before have real house prices risen so fast, for so long, in so many countries ... This is the biggest bubble in history." And Capt. Ben is just using Greenspan's discredited strategy.

Worse yet, at a recent conference in Shanghai, St. Louis Fed President James Bullard said America's interest rates will likely remain low for "quite some time." Yes, he loves blowing and busting bubbles. Unfortunately, with that outdated ideological mindset protecting the Fed's fat-cat members, we'll see a rapid buildup of asset bubbles across the globe, just as The Economist is warning. We can even predict that Capt. Ben will again ignore warning signs and push us blindly ahead into his fog.

Second iceberg: Gulf oil real estate bubble collapse

In "Burj Dubai: A Temple to Hubris," a Los Angeles Times critic wrote a brilliant critique of the total bankruptcy of the newest tallest building in the world, sitting in a desert metropolis: "Burj Dubai's real symbolic importance: It is mostly empty, and is likely to stay that way for the foreseeable future. Though most of its 900 apartments have been sold, nearly all were bought three years ago -- near the top of the market -- and primarily as investments, not as places to live. ... And there's virtually no demand in Dubai at the moment for office space, of which the Burj Dubai has 37 floors."

The Dubai tower "is a powerful, iconic presence in ways ... the latest, and biggest, in this string of monuments to ... easy credit, during the boom years and the sudden paralysis of the financial markets in the fall of 2008 have created an unprecedented supply of unwanted or underoccupied real estate around the world," dead monuments to "the broader notion ... that growth can operate as its own economic engine, feeding endlessly and ravenously on itself ... the tombstone -- for some ruined ideas."

Third iceberg: China's overheated real estate bubble

Worse, read "Mania on the Mainland: Think the U.S. real estate bubble was bad? China's could be worse" in Bloomberg/BusinessWeek. China's "real estate rush is fueling fears of a bubble that could burst later in 2010, devastating homeowners, banks, developers, stock markets and local governments." Then China's "economic growth will stop, warns Yi Xianrong, a researcher at the Chinese Academy of Social Sciences' Finance Research Center." Premier Jiabao even told the Xinhua news agency that "property prices have risen too quickly," pledging "a crackdown on speculators."

Fourth iceberg: Commercial real estate, a ticking time bomb

But worst of all, here at home we read in yet another Bloomberg/BusinessWeek article, "Why This Real Estate Bust Is Different," that "unrealistic assumptions, layers of investors, sky-high prices and possible fraud will make it hard to clean up the mess in commercial real estate." Yes, there's another homegrown mess far bigger than America's residential real estate. Imagine, a $1.7 trillion ticking time bomb sitting on our bankers' books, equal to "roughly 25% of the assets of the average institution." A very big iceberg.

What happened? "Overbuilding isn't the culprit in this bust. An oversupply of money is what pushed commercial real estate over the edge. It turns out the same excesses that drove the housing market's crazy rise and fall were present in commercial real estate, too -- but they have largely gone unnoticed until now.

Bankers, in their haste to make more and bigger loans, blindly accepted borrowers' wildest growth assumptions and readily overlooked other shortcomings on loan applications" to "easily sell their dubious loans to investors in the form of commercial mortgage-backed securities"

Bottom line: Avoid sinking the U.S.S. Titanic ... a Capt. Ben mutiny!

Capt. Ben can't be trusted. What'll Capt. Ben do if he's still around piloting the good ship U.S.S. Titanic? He'll hit more icebergs, or battleships, or black swans. Can't help himself, it's in his ideological DNA. Then he'll blame others, while secretly bailing out his Wall Street banker buddies, piling on trillions more debt, doing it with his usual arrogance, no transparency and no accountability.

Yes folks, if Capt. Ben's still at the helm, if Obama and the Senate keep him, you can bet our unaudited Fed will secretly ease the banks pain (again) shifting trillions more to taxpayers, the "suckers-of-last-resort." Yes, it's time for the "Bernanke Mutiny" in the Senate!

source HERE

Posted by Mr Thx Tuesday, January 26, 2010


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Sekapur Sirih Seulas Pinang

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Alor Gajah, Melaka, Malaysia
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