Popped Psychology

  Bubbles are a fascinating subject to us here at Mytwocent$. When inside one, it is often difficult to realize it. Human nature as well as flawed perspective makes spotting bubbles very tricky - doubly so, when you are in them. Rather than focus on historical precedents in identifying a bubble, it is much better to study the behavior of  market participants in an objective manner. Human nature is a constant. As such all bubble participants, regardless of the underlying subject,  exhibit the same behaviors.  Identify those, and you can spot a bubble. 

  For starters, participation is always widespread. When people who have no connection to a particular industry are piling in - its a bubble. Secondly, most participants are leveraging their way in, meaning they are borrowing (OPM) other peoples money just to participate. Third, the growth rates are mathematically unsustainable, yet participants in a bubble turn a blind eye (some due to greed, others due to ignorance) to the compelling math, with emotional justifications like "this time is different". Fourth, and perhaps most importantly - you can't reason with participants on any fundamental level, because it is faith driving their decisions - not rational thought. 

 Viewed through this lens, it becomes easier to differentiate between Bubbles & Bull markets.   Since most big  bull markets eventually give way to blowoff bubble tops before collapse, the value of being able to tell the difference is priceless. 

   We will examine eight of the largest bubbles in existence today, and then one market - which obviously does not qualify - no matter what the MSM says. 

  

1. Government spending  - all four bubble elements are here. Unsustainable widespread use of other peoples money, seemingly with no rational thought.  Government spending is over 40% of this nations GDP, and growing exponentially.  Our universe abhors a vacuum, as such it does not allow anything to grow at an increasing exponential rate indefinitely.  That means, either they get spending under control or the whole system collapses under its own weight. There is no third alternative

2. Educational costs - College tuition in this nation is out of control. It has grown in cost, exponentially,  for decades, seemingly with no end in sight. Gman (using OPM) forces up tuition costs through their student loan programs, to levels much higher than what the market would support if students actually had to pay their own way upfront.  They also saddle our brightest youths with massive debt burdens in the process.  Is it any wonder our universities teach almost everything except independent thought?

3. Medical costs - This is another market driven to stratospheric levels because of the widespread use of OPM. When Mom gets sick and has to go to the hospital, she deserves nothing but the best. Cost is no object. That attitude is prevalent, because of OPM. If people had to pay as you go for medical care, market forces would push costs down to a fraction of what they are today. Once again, its widespread use of OPM that drives up costs, saddling the sicker members of society with massive debt burdens in the process. Despicable. 

4. Military complex - As a nation, we spend 10x more $$ on a military, than any other nation on the planet. The Imperialistic ways of  empire & maintaining the paper con are to blame. Do you really believe other nations would take our paper in exchange for their goods, if it weren't for our military? Saddam said no more dollars for oil, he had a rope around his neck in less than three years. One of the chief causes of the collapse of the Roman Empire was maintenance of the oversized military.  It will contribute to our undoing as well.    

5. Wars - I'm calling a bubble in wars also. Iraq, Libya, Afghanistan, the drug war, war on poverty - I'm tired of it. Gman could never fund all these wars without the widespread use of other peoples money.  The only group who benefits from war are the bankers. Everyone else suffers. This is why Ron Paul represents the only alternative to the status quo in the next election. He, unlike ALL the others,  wants to end these wars. His is clearly the moral high ground.  

6. Paper dollars - Of all the bubbles on this list, this one amazes me the most - due to the sheer number of people taken in by it. Equally amazing is how futile it is to reason with those whose faith is placed in paper dollars. Even a casual glance at history shows ALL paper currencies eventually collapse once the victims get spooked & lose faith. Fact is, when you hold a dollar - you hold a claim backed by the full faith & credit of the US Government. I ask you dear reader, what could that really be worth?

7. Corruption - It is the oil which lubricates the economic engine of this country. The problem is corruption is so widespread, said engine is submerged. Its everywhere you look, and it always involves OPM. Ponzi schemes, rigged bids, kickbacks, political donations, earmarks, bailouts, legalized theft (MF Global), Manipulated markets, hidden taxes, short sales,  the list is endless. Corruption is a moral cancer which has taken over the host organism (our country). Like all things in nature which grow at an exponential rate, the cancer as well as the host, will eventually die.  

8. Bonds - this is, by far, the most dangerous of the bubbles listed here. When this one pops, all the other bubbles listed here will pop too. Buying Bonds today is no different than playing the childhood game of musical chairs. There comes a point where interest rates can't go any lower, meaning Bonds can't go any higher. That is where the music stops , and you either have a chair, or you don't. BTW, chairs only come in two types, Gold or Silver. 

9.  Gold market - There is no widespread participation. Nor, are there people leveraging their way into gold. Well paper gold maybe, but not the real deal. History would suggest the growth rate in dollar price is plenty sustainable for another decade. Gold bulls do not own gold because of any blind faith, they own it because logically & fundamentally its the place to park your wealth. Bagholder would argue, it is misplaced faith in Gmans paper by 99 percent of the populace that will make the 1 percent of us long gold, wealthy beyond the dreams of avarice. Since none of the bubble criteria exist here, its obvious Gold must be in a Bull market instead. Come get you some!!!!