Are you ready for the Great Oil Bubble Implosion?

Bubbles are funny.

Until they aren't.

Let's look again at oil, where total world demand rose by... wait for it... a whopping 0.9% (YES, THAT'S ZERO POINT NINE PERCENT) over the past year, while world liquids and crude production increased slightly more than 1%. And yet prices per bbl. rose over 80% in the past year, and 697% since 2001. Pets.oil anyone?

So what's driving the current Great Oil Bubble (GOB) madness? Oh, maybe the $3.5 trillion in oil derivatives, or the $90 billion in speculative hot money that's poured into the new commodity indexes.

There is no consumer-market-based justification for the rise in oil prices. The madness is purely and simply a speculative one, just like housing, just like dot-com stocks, just like tulip bulbs and tea.

Yes, the same hedge funds, pension funds, investment banks and hot-money investors who gave you the housing bubble and mortgage madness are now giving you the GOB.

Bubble after bubble after bubble... Just as we expected. But with housing it was "HEY, COOL, WE'RE ALL GETTIN' RICH RICH RICH!!!!", while with the Great Oil Bubble it's "HEY, CRAP, WE'RE ALL GETTIN' POOR, POOR, POOR!!!".

Keep in mind that bubbles last longer than you think they ever will. But in the end, they end. All of 'em. And this one will too. Where and when will it end? Who knows. But when it does, it will end spectacularly and gloriously. And when it does, there will be RAGE in the streets as gas prices don't come down along with the price of oil. But that's another story...

There is one nice lasting effect with this Great Oil Bubble though - it has changed the world's collective consciousness in regards to fossil fuels and consumption. The "GOB" will launch a clean energy revolution - wind, solar, biomass, nuclear and even some energies as-yet-undiscovered. And SUVs and trucks are the new mink coats - their owners are now social pariahs, scorned and mocked while they piss what's left of their money away at the pumps.

And a word for the Peak Oilers out there - yes, at current consumption and production rates, we've got a problem. But what you don't take into account is that the world (i.e. 'the market') because of prices, political instability, global warming and the dramatic change in collective consciousness, will now be making The Great Change, away from fossil fuels as fast as it can. Past demand does not equate to future demand as your projections dictate. And a Big Change is coming.

Here's some recent quotes on the GOB. Get some popcorn. And have at it.

" There's nothing different between this mania, the dot-com mania, the real estate mania, the Dow Jones mania of the 1920s, the South Sea bubble and the Dutch tulip-bulb mania. History repeats itself over and over and over again."
- Stephen Schork, oil analyst, June 2008

"Current price levels do not reflect supply and demand realities. A review of prospects for the remainder of the year also shows little support for prices to remain at current levels."
- OPEC statement, June 2008

"The supply-demand fundamentals do not explain the sharpness of the ascent this year. Nor does it make any allowance for the reaction of the end consumer."
- Bill Jamieson, Economics Editor, Sunday Telegraph, June 2008

HousingPANIC Stupid Question of the Day

What percent of realtors do you think have read "Manias, Panics and Crashes"?

What percent do you think should have before they positioned themselves as "financial advisors"?

And who should we send copies to?

One more time, for the newbies: Cash is King

"The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king"

- Manias, Panics and Crashes, the HP Bible

And no, "cash" or "money" has not meant and will never mean owning one specific currency. "Cash" or "money" take many forms. "Liquidity" is what Kindleberger was getting to. And so should you.

Money is any token or other object that functions as a medium of exchange that is socially and legally accepted in payment for goods and services and in settlement of debts. Money also serves as a standard of value for measuring the relative worth of different goods and services and as a store of value.

Market liquidity is a business, economics or investment term that refers to an asset's ability to be easily converted through an act of buying or selling without causing a significant movement in the price and with minimum loss of value. An act of exchange of a less liquid asset with a more liquid asset is called liquidation. Liquidity also refers both to that quality of a business which enables it to meet its payment obligations, in terms of possessing sufficient liquid assets; and to such assets themselves.

FED PANIC!!!! Open thread to talk about today's housing-crash-caused stock market crash / rally / craziness

UPDATE: AS PREDICTED BY HP'ERS THE FED PANICKED, DROPPED RATES 3/4 POINT - AND JUST MINUTES BEFORE THE MARKET OPENED. WILL IT WORK?

YOU'RE WATCHING THE PLUNGE PROTECTION TEAM IN ACTION NOW!! BUT HOW MANY BULLETS DO THEY HAVE LEFT IN THE GUN? CAN THEY STOP THE PANIC? OR IS THEIR PANIC GOING TO MAKE PEOPLE PANIC EVEN MORE?

_________

Sometimes being on the sideline with buckets of cash is the best place to be.

Let the movie start already! Man, two days of a worldwide stock market crash and the US hasn't even opened yet, it's gonna be interesting. PPT? Helicopter Ben? Trading curbs?

One more time, for the newbies:

The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king.

HousingPANIC Stupid Question of the Day

You do realize that some will blame us for this financial collapse underway, and their own deteriorating situation, right?

I'll remind people again that we simply reported the truth, and what was to come. Somebody had to do it. Take the threats and aggression to where it belongs - that would be the bankers, the politicians and the REIC of course.

And you should have known too. It hath been foretold.

The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king.

Ho-hum, another day, another run on a multi-billion dollar investment fund

Everyone just go read Manias, Panics and Crashes. Then when you see headlines like this, you'll look up, smile, and then go back to your popcorn.

Florida Freezes Its Fund as Governments Pull Out

Seeking to stem a multibillion-dollar run on an investment pool for local governments, top Florida officials voted yesterday to suspend withdrawals from the fund, leaving some towns and school districts worrying about how they would pay their bills.

Local governments in recent weeks have been withdrawing billions of dollars from the fund, fearing losses on investments in debt related to subprime mortgages. The rush to get out of the fund began even though a relatively small percentage of the fund is invested in subprime-related debt, and it is unclear what losses the fund may sustain.

HousingPANIC Stupid Question of the Day

Regarding the "cash is king" mantra, as written about in Manias, Panics and Crashes:

The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king.

Is "cash is king" still relevant today (especially non-US$ cash)? Or, because of an incompetent, negligent and corrupted Fed, is it truly gonna be "different this time",

Are you ready for the storm?

Again and again, and you'll know why soon enough, I'll repeat this mantra from the HP bible - Manias, Panics and Crashes:

· The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king.

And so here we go... should be quite the ride this week, pre-Fed. Buckle up.

Banks face 10-day debt timebomb

Britain's biggest banks could be forced to cough up as much as £70bn over the next 10 days, as the credit crisis that has seized the global financial system sparks a fresh wave of chaos.

Fears of this impending call on bank credit lines are the true reason that lending between banks has ground to a halt, according to senior money market sources.

"Banks are hoarding cash," said David Brickman, the head of European credit strategy at Lehman Brothers. "We think the reason for that is the commercial paper markets. There was $100bn of commercial paper issued by European institutions that was scheduled to roll over in August, much of which struggled to do so.

Has this housing bubble and crash been textbook Econ 101 or what?

I feel sorry for people who haven't taken an Econ 101 class, or listened to ignorant and corrupt realtors on commission who don't even have high school degrees, but damn, is this mania, panic and crash straight out of the textbook or what?

Adam Smith, John Kenneth Galbraith, John Maynard Keynes and Milton Friedman would all be smiling today - and renting!

And they'd all be pissed that the two NAR hacks David Lereah and Lawrence Yun call themselves "economists". What a disgrace to the profession.

Manias, Panics and Crashes on "Discredit" and the scramble to unload at greater and greater losses

One more time, so you know what's happening, and what's going to happen.

There should be no surprises for HP'ers. None. It hath been foretold.

From the HP Bible "Manias, Panics and Crashes" by Kindleberger:

* Ultimately, the markets stop rising and people who have borrowed heavily find themselves overstretched. This is 'distress', which generates unexpected failures, followed by 'revulsion' or 'discredit'.

* The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king.

HousingPANIC Stupid Question of the Day

Is the housing bubble and crash a perfect textbook example to this point?

Will there be any surprises along the way?

Got cash? Morgan Stanley issues "Triple Sell Warning" on equities, first time since dot-com crash

Got cash? It's tough to pick exactly when markets will crash and bubbles will pop, but it's pretty easy to identify "why". And as Buffett said, always sell too early. The stock market euphoria during this historic housing crash has been interesting to watch, especially in the context of Bernanke's "it won't spill over" statements. Yeah, right, Ben. We trust you.

Everbank is paying 6.01% on savings. HSBC is also 5.5%, and e-loan has some good CD rates I'm enjoying. I check bankrate.com for the best rates and just keep it moving around. With bond yields soaring those saver rates will keep getting better hopefully.

Keep in mind you don't want more than $100,000 in any one bank (FDIC limit), 'cause bank failures may be next during the rush to cash, as is written about here.

Good luck out there.

Morgan Stanley warns the 'mid-cycle rally is over'

Morgan Stanley has advised clients to slash exposure to the stock market after its three key warning indicators began flashing a "Full House" sell signal for the first time since the dotcom bust.

Teun Draaisma, chief of European equities strategist for the US investment bank, said the triple warning was a "very powerful" signal that had been triggered just five times since 1980.

"Interest rates are rising and reaching critical levels. This matters more than growth for equities, so we think the mid-cycle rally is over. Our model is forecasting a 14pc correction over the next six months, but it could be more serious," he said. Mr Draaisma said the MSCI index of 600 European and British equities had dropped by an average of 15.2pc over six months after each "Full House" signal, with falls of 25.2pc after September 1987 and 26.2pc after April 2002.

"We prefer to be on the right side of these odds," he said.

The first of the three signals Morgan Stanley monitors is a "composite valuation indicator" that divides the price/earnings ratio on stocks by bond yields. It measures "median" share prices that capture the froth of the merger boom, rather than relying on a handful of big companies on the major indexes.

Why don't the monkeys who are paid to understand basic economics understand basic economics?

Why do housing "analysts" and the Fed continue to be "shocked" and "surprised" by the length, severity and breadth of the housing crash?

Are they truly that dumb?

I also love when I read in the MSM that "nobody" anticipated this decline. Uh, ever read HP or any of the other bubble blogs? Or read The Economist?

I understand when realtors, mortgage brokers, homedebtors and shoe shine guys don't understand this stuff. Especially considering the pathetic state of the American education system and dumbing down of the MSM. But come on, you're telling me The Federal Reserve doesn't get it? IF that's true, that's pretty scary.

Maybe we should send a copy of Manias, Panics and Crashes to all of 'em. You'd figure in economics class (assuming to become an "analyst" you have to go to college) they'd cover this stuff.

After the biggest bubble and financial mania in the history of humanity, you'd think they'd understand that it's a long, long way back down.

Fed sees housing correction dragging on

The correction in the US housing market will “probably persist longer than previously anticipated”, Federal Reserve policymakers judged at their last meeting, according to minutes released on Wednesday.

The minutes show that Fed officials meeting on May 9 were concerned by the decline in new home sales and the rise in the inventory of unsold homes relative to the rate of turnover.

Most of the members of the Federal Open Market Committee felt that weak residential investment would “continue to weigh heavily on economic activity through most of this year” – longer than expected.

One more time, for the uninitiated, from Manias, Panics and Crashes (got cash?)

The upswing usually starts with an opportunity - new markets, new technologies or some dramatic political change - and investors looking for good returns.

It proceeds through the euphoria of rising prices, particularly of assets, while an expansion of credit inflates the bubble.

In the manic phase, investors scramble to get out of money and into illiquid things such as stocks, commodities, real estate or tulip bulbs: 'a larger and larger group of people seeks to become rich without a real understanding of the processes involved'.

Ultimately, the markets stop rising and people who have borrowed heavily find themselves overstretched. This is 'distress', which generates unexpected failures, followed by 'revulsion' or 'discredit'.

The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king.

HousingPANIC Stupid Question of the Day

Why is everyone seemingly so surprised with the housing crash?

Do we need to buy Manias, Panics and Crashes for every man, woman and child?

Geeze. It's just so damn OBVIOUS for HP'ers, and real economists (vs. TCDL).

So, when it comes to the housing crash underway, why are so many so damn clueless?