I've just finished this book - "Bubbles and How to Survive Them", and it's joined Manias, Panics and Crashes as one of my all-time favorites

The author John P. Calverley does a great job talking about what makes a bubble, what to look for, how leaders react, what to expect from the central banks, what the impact is on inflation and the currency, and how to preserve your wealth when the masses go mad and then recover their sanity one by one.

Some of my favorite quotes:
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"At some stage the bubble reaches a phase variously called euphoria or mania, where speculation mounts on top of genuine investment and expectations for potential returns reach wild heights. Strong market performance is extrapolated endlessly forward and any consideration of fundamental valuation criteria is swept aside"

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"The worst point of the Depression came in March 1933, when the wave of bank failures led to a general panic and the closure of all banks. The Dow Jones index actually bottomed before then with the close on July 8th, 1932 at 41.88, a drop of 90 percent from its peak."

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"Governments have even less interest in drawing attention to the dangers of asset bubbles. Voters generally like bubbles. Many people profit from them, though for some the gains turn out to be only on paper and disappear later... But in general it is easy to win elections during bubble periods, because people feel wealthy and the economy is doing well."

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In the end the author calls for an "Asset Evaluation Committee" and a warning system for when our financial system (stocks, bonds, real estate, etc) venture into bubble territory, so at least investors are warned. I like the idea, and instead of a committee of humans, I'd recommend a computer. The fundamentals are the fundamentals, and when people are paying 8 times income for a house, it's a bubble. When stocks' P/E is 40, it's a bubble. When renting is a fraction of the cost of "owning", it's a bubble. When people are camping out to buy an asset, it's a bubble.

Give us a nice color coded warning system, instead of Greenspan's "Froth" or "Irrational Exuberance" parlance, and even the masses will get it.

I highly recommend this book for all HP'ers. You owe it to yourself. Then pick up "Crash Proof" by Peter Schiff so you know how to invest, and for god's sake read Manias, Panics and Crashes. I'm not that smart - everything I predicted came from reading that one classic book.

Bubble to bubble to bubble to bubble

Since we've lost our manufacturing base, perhaps the way out of this mess short term is just to keep inflating bubbles

Nasdaq - nice bubble. Popped.

Housing - REALLY nice bubble. Popped.

So, it it time to reinflate the stock market bubble? No bubble and we got trouble. And it feels like Wall Street knows this.

"All the world's a bubble - The bursting of this bubble will be across all countries and all assets"

Remember, after bubbles pop, cash is king. So sell in May and go away? Or try to ride this crazy bubble 'til it's eventual and necessary end?

While euphoria sweeps stock markets here and worldwide, there are at least a few voices of dissent.

One, unsurprisingly, is legendary value investor Jeremy Grantham -- the man Dick Cheney, plus a lot of other rich people, trusts with his money. Grantham, chairman of Boston firm Grantham Mayo Van Otterloo, has been a voice of caution for years. But he has upped his concerns in his latest letter to shareholders.

Grantham says we are now seeing the first worldwide bubble in history covering all asset classes.

Everything is in bubble territory, he says.

Everything. 'The bursting of this bubble will be across all countries and all assets.'

"From Indian antiquities to modern Chinese art," he wrote in a letter to clients this week following a six-week world tour, "from land in Panama to Mayfair; from forestry, infrastructure and the junkiest bonds to mundane blue chips; it's bubble time!"

"Everyone, everywhere is reinforcing one another," he wrote. "Wherever you travel you will hear it confirmed that 'they don't make any more land,' and that 'with these growth rates and low interest rates, equity markets must keep rising,' and 'private equity will continue to drive the markets.' "

"The bursting of this bubble will be across all countries and all assets, with the probable exception of high-grade bonds," Grantham warned. "Since no similar global event has occurred before, the stresses to the system are likely to be unexpected. All of this is likely to depress confidence and lower economic activity."

One day soon all the get rich quick housing fools will understand

We've run this classic cartoon a few times over the past year and a half. Figured it was time again, after David at BubbleMeter reminded me the other day.

So many have made fun of HP'ers (and continue to do so), saying "it's different this time" and "the fundamentals don't matter". The trolls go on and on about how prices haven't crashed yet (per the NAR and US Government), how renters and frugal people are stupid, how even though supply is sky high it's just a return to normal, and how they ain't makin' more land.

I hope they stop for a moment, take a look at this, and maybe, just maybe, in their tiny little brains, simply understand. Oh, the folly of human nature. We've been here before, and we'll be here again.

We've just never been here before at this level. It truly is different this time, I'll give the trolls that one. This was the biggest bubble in the history of humanity. Now that's impressive.

And now, the biggest crash awaits.

Got Yen?

You can move some of your dollar holdings easily into the waaaaaaaaaaaaaaaaaaaaay underpriced yen via the yen etf FXY. Buy low sell high. The Fed will be lowering rates soon, the BoJ will be raising rates, and we all know how the yen carry trade bubble will end - just like all bubbles. The only question is when.

Why Americans put all their savings into dollars I'll never understand. Well, when you pay $15 for a glass of so-so wine at a pub (as I did last night), then it really comes to life. The dollar will continue to shrink and shrink and shrink. We're insolvent folks. And all that funny money Bush and Congress keep spending? The only way we'll ever pay it back is through the printing press.

Neil Mellor, currency strategist at Bank of New York, warned that with a large amount of uncertainty still surrounding the health of the US economy and with continued geopolitical tensions, there was a good chance that carry trades could face further pressure.

"The fact is the trigger is cocked," he said. "Given the recent rise in volatility, the risks investors are taking to get yield smack of the end of a bubble.There is little rationale that this bubble will not meet its end."

HousingPANIC Stupid Question of the Day

Regarding the Great Housing Crash of 2005 - 20XX, how does it all go down from here?