Given where stocks, bonds, and credit are trading at right now, people start questioning whether there is the risk of a Bubble or Bubbles forming. There are many theories floating around these days over the Blogosphere and the Financial Media. I thought I’d contribute my 2 cents and see where we go from here.
I’ve decided to cut through the Bull-Crap and get straight to the point; which is why this post will be an FAQ Styled Post.
Do I think that there are Bubbles forming at this very moment?
YES. But contrary to the “Central Banks Printing Money” argument, I believe that irrespective of monetary policy, there is always a risk of Bubbles forming; it’s just human nature. I mean, we need to put our money somewhere, don’t we? So, we just follow the herd and do what every one else is doing; hence contributing to the Bubble Formation. Knowingly or Unknowingly.
What or Where are these Bubbles forming?
From my analysis, I believe the next financial collapse will be caused by a Housing + Credit + Debt Bubble Bursting in the Emerging Market Economies (China, India, Brazil, etc…). These being Developing Countries, in order to boost their economic output and growth, tend to loosen their credit standards and encourage borrowing and spending. Combine that with all the freshly printed hot money flooding these Emerging Market, and you have a perfect recipe for DISASTER. Though I’m a born optimist, I believe that these Emerging Market Countries have crossed the point and no return, and the only direction they go from here is: DOWN. I’m sorry but that’s the cold hard brutal truth. Anyone who thinks that China wont have a hard landing, is kidding themselves and need to rethink their career choice; or better yet, go back to high school and this time, pay attention in your Economics 101 Class.
When will these Bubbles Burst?
The million dollar question of course: When will these Bubbles Burst? There is no mathematical formula to predict that, but what I can say is that, by Q4 2014, these Emerging Market Countries would have exhausted all their resources and tools to inflate/grow their economy, and they will start their Descent/Chaotic Crash Landing into Depression.
Phewww !!! That was some dark shit. I think I need a beer now.
Wall Street Fool
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