Our most recent economic bubble was the housing market and we all know how that ended. Keep in mind, during the frenzy anyone who raised any red flags was immediately labeled a bubble head. When the music is playing very few plan for what will happen when the song ends.
Right now our loose monetary policy is playing another enticing song. The loose monetary policies from governments across the world have flooded the markets with capital and it seems just about everything has soaked it up. The S&P is approximately 40% more expensive in relation to earnings than its long term average. Oil is trading at a 15 month high. Metals have had an outstanding year: silver gained 49%, palladium gained 117% and copper gained close to 140%.
It just may be prudent to plan for now for the consequences of our abundant loose money policy to avoid getting caught with your pants down again.
In 2005 most of the commentators on the real estate market were saying there’s no bubble and our mini boom would never end, this is a sure sign that an end is fast approaching.
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This was a good post; I am not sure if I have anything positive to say. First off, growth in home prices over the past few years was unnatural too. There were things in the mix that caused the free market system not to work, or maybe better said, “balloon.” There was government trying to create more tax revenue by relaxing monetary guidelines, the fed was keeping interest rates low on an artificial basis and then there were the promoters- Realtors, Mortgage companies, builders and the media to name a few, who pushed the notion that you could get a home for free. The risk reward portion of the equation was taken out. Now we face an industry that is broken and may not recover for quite awhile.
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