Are We in a Bubble Economy? Its Easiest Way to Tell, Get Info Right Now
Fri, Feb 22, 2013
USA Bubble Economy
After all, when all of your investments are going up – whether they’re gold, stocks, bonds, or real estate – it’s most likely because you’re a wise investor, right?
That’s what most people believe. And they only realize the bubble when it’s well past and it’s too late to take profits.
That’s why we at Contrarian Insights have developed a number of ways to tell when we’re in a bubble.
One of those We’re In A Bubble Right Now flashed clearly earlier today.
Bloomberg reports in Bernanke Said to Minimize Asset-Bubble Concern at Meeting:
Federal Reserve Chairman Ben Bernanke minimized concerns that the central bank’s easy monetary policy has spawned economically-risky asset bubbles in comments at a meeting with dealers and investors this month.
What we have here we have here is a major play in the political side of the financial industry essentially saying we’re not here in a bubble.
This kind of move-along-nothing-to-see-here comments are historically the exact opposite of what is happening.
Some other classic comments like these include;
Ben Bernanke in February 2008:
I don’t anticipate any serious problems of that sort among the large internationally active banks that make up a very substantial part of our banking system.
Six months later the banking system was insolvent.
Ben Bernanke again June 2008:
Despite a recent spike in the nation’s unemployment rate, the danger that the economy has fallen into a ‘substantial downturn’ appears to have waned.
As reports would later prove, the economy was already seven months into a recession. And the worst financial and economic collapse in decades followed a few months afterwards.
Barney Frank in July 2008:
Fannie Mae and Freddie Mac are fundamentally sound. They’re not in danger of going under…. I think they are in good shape going forward.
Three months later both Fannie Mae and Freddie Mac were bankrupt.
As you can see, the politicians and political players have a motive to state the exact opposite of what is happening in the real world.
Most often they tend to make these statements at exactly the wrong time.
So are we in a bubble?
There’s no way to tell. But this indicator says we certainly are in one.
So Bubble Investing Rules apply. Jump on board and go for the ride. But set trailing stop losses and stay away from illiquid assets which can be tough to sell so when it starts to burst you can run to the safety of the sidelines.
Executive Editor, Contrarian Insights
The Group of Big Investors in United States.
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