The great bubble of 2009 that speculators are piling into is several bubbles.

1. Emerging market equities
2. Gold and Silver
3. U.S. equities,
4. shorting the dollar
5. carry trade
6. oil
7. bonds

Think about it. None of them support the money flowing into them. That is why so many are involved in this speculation. We have built a house of cards and people don’t know where safety lies so they go with whatever they think is best.

Even bonds that use to be the safest investment in the U.S. are now at risk of a big sell off if the FED says or does the wrong thing. We are spending more than we can borrow and that threatens bonds too. Corporate and muni bonds are at risk and getting riskier as commercial loan default rates go up spooking lenders and cities and state become risky as tax revenues continue to slide and interest eats up a higher and higher percent of the remaining tax revenues.

We have how much money “on the side lines that needs to come into the market” as they say on the financial news outlets? Where will it go? Cash is the only lower risk thing and there is no return and it gets riskier the longer we deficit spend more than we can borrow and the FED has to monetize more debt. (Oh wait, they promised they wouldn’t do that).

When would cash be safe? When interest rate are rising and all those categories are selling and creating demand for dollars and the economy is getting worse. The FED doesn’t want to raise rates but, the market may say otherwise. The loans may totally dry up if they don’t start getting a better return.

Very interesting times.

-JanPaul

Related Posts:

• This is in response to all who say that the things President Obama says need to be done, should be done by him.
• Any rise in interest rates will speed up the collapse.
• The sword that will cut the knees off this laughable “recovery”:
• Fed’s Keynesian Economic Theory
• The risky derivatives market is still alive and possibly worse than before this crisis.

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