Sunday, May 29, 2005

Triggers that Could Contribute to a Bubble Pop

Here is a list of tiggers that might occur in the next 12 months that would contribute to a poping of the bubble.
  1. Rising fuel prices
  2. Increased media coverage (already happening)
  3. Tighter lending practices
  4. Foriegners cut back on buying up bundled mortgages
  5. Rising interest rates
  6. GDP starts stagnating
  7. A new hot investment category is found. Sucking money out of the housing market.
  8. Natural distaster / terrorist attack
  9. "upward valuations of the Chinese Yuan" (thanks commentator marutib)
  10. Something Else? Discuss


  1. I think that one of "other" triggers for a major burst of the bubble is going to be upward valuations of the Chinese Yuan, which can happen late summer 0f 2005. (BTW, investment out of dollars into Asian currencies is gong to be quite rewarding, as Warren Buffet is betting on.) It will at least lead to two things:
    (a) Reduced imports into the US, leading to inflation
    (b) Steep rise in interest rates
    There will be economic desperation as housing market goes into recession. While temporarily painful, this may not be a bad thing, as investment money will once again get allocated to more productive economic activities than associated with the housing boom. We may be able to find MadeInUSA goods once agian in the local WalMarts! That will be the upside of the bubble burst.

  2. It does not need a trigger. Lack of new suckers itself is sufficient. Of course, we can use some help from other factors.

  3. i don't think it will take long for this thing to implode. all you've got to see is a major market start to show stagnation. most of these guys that are speculating in real estate are using real estate agents, which puts them 4%-6% underwater out of the gate. once people start to see stagnating prices and rents not going up, they'll puke.

    i think what's so fascinating about what's going on now is the level of leverage that market participants are using to purchase real estate. it won't take a big move in prices to start the puking. i think it's a matter of time before we start to see these "investors" sh*tting their pants.

  4. H5N1 ("bird flu"), a close relative of the virus that killed between 20 and 40 million so quickly in 1918, reaches pandemic status. This would be much worse than a terrorist attack, and far more difficult to defend against.

  5. 10:26 Anon, it is estimated that H5N1 will kill about 7 millions people if it turns into a pandemic. It will probably have more effect on the aging population.

    Anyway, I think the bubble will burst way before the flu becomes a problem.

  6. Increased media coverage may simply send the message that everyone now knows about "The RE Bubble" but all parties the Fed , banks, RE agents, Government are watching it happen and doing nothing concrete about it. All parties are "de-facto" giving approval for Joe Citizen to leverage himself to the hilt !

    The MORAL HAZARD is Increasing !

    Joe will be demanding a bailout for sure.

  7. Job creation numbers are a real tell tale. The Service sector has been the creation engine, but those jobs are not going to replace the jobs being lost in the manufacturing and High Tech sectors, that have been farmed out - to Asia.
    The Asian Auto Industry has eviscerated the North American Auto Giants, and we are going to see huge job losses in parts and tertiary Industries. Michigan, and Ontario and Quenbec, in Canada are in trouble.
    The time is for conservative spending...sell the gas guzzler, try and get some junior gold stocks, dump your Credit card debt and pray to GOD we can all get through the coming Depression. My friends, it is coming and might have even started in some areas of the World. Google KONDRATIEFF.