Crash vs Another Bubble?

[Nova]

All this week I've been trying to get a handle on what to expect. Is now the time our economy crashes? Or is there another bubble?

Is alternative energy our next bubble? I mention this because of the push for "carbon tax" & the whole green energy movement. Not that I'm sold on CO2 as a cause for global warming. But that it is a view held by all the candidates. And Canada already has a carbon tax.

I think ethanol from corn is a bad idea. But I have always liked solar as an energy alternative.

What do you all think?

[jds6958]

This has been top of mind for the last few months. At this point I am not expecting a bubble to pull us out of this. I believe it is possible, but I consider it unlikely. I believe we are too deep already and the train is moving too fast to be slowed down or reversed by a bubble. If a bubble does happen I expect alt. energy to be one of the top suspects. It is on my radar. Solar is already my favorite and economy providing, I would like to implement some solar solutions in the next year. Ethanol is a horrible idea imho for some obvious reasons. If a bubble does happen it will offer a few years of delay, not a solution. Until the mountain of derivatives dissappears we are all walking around with a ton of bricks over our head supported by a thin rope.

[Chula]

Depends on what you read or who you listen to.
Some say certain doom and gloom, others are saying that we will be fine.
I believe that the negative feeds on itself. If we all believe the sky is falling, the it is.

[jds6958]

Depends on what you read or who you listen to.
Some say certain doom and gloom, others are saying that we will be fine.
I believe that the negative feeds on itself. If we all believe the sky is falling, the it is.

Once everyone believes the sky is falling I am buying and investing in everything that I can that make sense at the time. That is the signal to move from capital preservation to capital accumulation. Right now less than 1% of 1% believe that the economy is about to collapse. Once everyone believes things can only get worse then things will get better. That is just a general contrarian rule that works quite well.

If nearly 100% of the population believes something about the economy to be true, then chances are that the market has already priced that in. There is still a lot of the population that does not understand what is coming down the pipe or the risk that is out there, therefore there is still a lot that needs to be priced in. We are talking long term here and not daily/weekly fluctuations.

[Nova]

I had this nice long post & it evaporated when I went advanced. Rats. I'm a slow typer.

Keep talking guys. I appreciate the comments.

[Nova]

I had it in spellcheck still. Yess........

I'm just tossing out ideas here. In Nov, I expected the stock market to dive, then in Jan I expected higher food prices, now alternative energy keeps coming to mind.

The FED cut rates to bolster confidence & make credit easier. Plus, they increased the money supply by 10%-15% last year. That is alot of capital looking for a home. Why they thought it would ease the credit crunch is beyond me. Instead, investors were spooked about banks (since they can understand the derivatives mess) & sought hard assets.

So on top of a global grain shortage, we have a rising commodities market. Whether it will say up, depends on the weather & demand. The growing Asian market will keep demand somewhat higher regardless.

Now Bernake is talking about dropping rates again in the March 18 meeting. So they can't see the connection between 1) increased money supply, 2) lower interest rates & food prices? However, the lower interest rates are, the cheaper it is for the government to pay their loan obligations. So maybe that is the driving force. Their actions do help keep the government solvent, at the expense of the buying power of the dollar.

The FED is forecasting 4%-5% inflation this year & 5% unemployment. Based on the increased money supply. Double digit inflation on items like food & fuel seem more likely.

The risks are much higher now than when the last bubble burst-worse debt, already low interest rates, etc. And now it involves banking. Pundits are happy since that there is a plan for the bond insurers. But several trillions of dollars in writeoffs has to have fallout somewhere. It may be that the crash hinges on when foreign investors get sick of holding devalued dollars, not on the actions of the FED.

Still I feel that there is something stabilizing ahead, that I'm not seeing. Then again, maybe it is wishful thinking.

I need to give it more thought.

[jds6958]

I

Still I feel that there is something stabilizing ahead, that I'm not seeing. Then again, maybe it is wishful thinking.

I need to give it more thought.

If you start to see that stabilizing event coming to light, please be sure to discuss it and I will as well. If it does exist it is very difficult to find and even more difficult to determine how it may help quickly enough. In the meantime I plan on holding gold, food, and supplies. I have minimal hope left for reversing our current trend and I expect bottom to be at least 3-5 years away. However, I have been investing much time the last few months searching for exactly what you are looking for as well. It makes sense to keep a balanced approach.

[Nova]

So I gather I'm not missing something obvious.

[jds6958]

So I gather I'm not missing something obvious.


:aha It isn't obvious to me, not like the housing bubble was. What we need to find is the trigger. In the 80's it was rising rates making the USD more attractive and the emergence of China and other countries buying up our USD's. In the tech bubble the trigger was lower rates which prompted easy credit which caused a housing bubble and economy support. I have not seen the next trigger. If the Fed suddenly hints at supporting a national alt. energy program like the national highway project of years past, that would be a great signal. I just have not seen a signal yet. But I would expect as time progresses it may become more clear. Or we may find that one does not exist and we just have to purge all of the excesses.

At some point I guess you can just run out of bubbles. Each bubble needs to be bigger than the last to support and propel the economy. At some point there is just not a vehicle large enough to own up to the task. It just may be too early to tell. Right now alt. energy has a lot of contrarian trader's attention. It has mine as well. That appears to be the only thing in the pipe at the moment. Right now it is mostly speculation (which is a dangerous game in this environment anyways) with no real big push forward "yet."

I may be way off base, I don't really know. The above really sums up my thinking on the subject. I would like to see some further discussion on this for the next few months to make sure that this topic does not get burried...

[Tammy]

Help me understand this. So if there is another bubble this will keep a crash from happening. This would only buy us time right or would it get us out of this mess completely?