So you think the economy is "good"

[loosecannon]

But Dick Cheney's financial advisor knows better and points at you and laughs:

How high will the Dow go? 15,000? 20,000?

How about 36,000?

While euphoria sweeps stock markets here and worldwide, there are at least a few voices of dissent.

One, unsurprisingly, is legendary value investor Jeremy Grantham -- the man Dick Cheney, plus a lot of other rich people, trusts with his money. Grantham, chairman of Boston firm Grantham Mayo Van Otterloo, has been a voice of caution for years. But he has upped his concerns in his latest letter to shareholders. Grantham says we are now seeing the first worldwide bubble in history covering all asset classes.

Everything is in bubble territory, he says.

Everything.



--------------------------------------------------------------------------------
'The bursting of this bubble will be across all countries and all assets.' -- Jeremy Grantham
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"From Indian antiquities to modern Chinese art," he wrote in a letter to clients this week following a six-week world tour, "from land in Panama to Mayfair; from forestry, infrastructure and the junkiest bonds to mundane blue chips; it's bubble time!"

"Everyone, everywhere is reinforcing one another," he wrote. "Wherever you travel you will hear it confirmed that 'they don't make any more land,' and that 'with these growth rates and low interest rates, equity markets must keep rising,' and 'private equity will continue to drive the markets.' "

As Grantham points out, a bubble needs two things: excellent fundamentals and easy money.

"The mechanism is surprisingly simple," he wrote. "Perfect conditions create very strong 'animal spirits,' reflected statistically in a low risk premium. Widely available cheap credit offers investors the opportunity to act on their optimism."

And it becomes self-sustaining. "The more leverage you take, the better you do; the better you do, the more leverage you take. A critical part of a bubble is the reinforcement you get for your very optimistic view from those around you."

It's something to think about the next time you hear someone tell you that the stock market will keep rising simply because the world economy is doing so well. That would make sense only if we were paying a constant price for each unit of world GDP, instead of higher and higher prices for one slice of that GDP -- equity.

Grantham concludes that every asset class is expensive today compared with historic averages and compared with the cost of replacing it. By his calculations, the only assets likely to beat inflation by any significant margin if you hold them for the next seven years are managed timber, "high-quality" U.S. stocks, and bonds.

"The bursting of [this] bubble will be across all countries and all assets, with the probable exception of high-grade bonds," Grantham warned. "Since no similar global event has occurred before, the stresses to the system are likely to be unexpected. All of this is likely to depress confidence and lower economic activity."

Ouch.

Grantham sees two big potential catalysts that might turn this bull market into a bear: a surge in inflation, leading to higher interest rates, and a squeeze on profit margins, which are currently running way above long-term averages.

As for timing, he concedes that's impossible to predict. But here's the kicker: Even Grantham thinks you probably need to be bullish right now. The reason? Most bubbles, he notes, go through a short but dramatic "exponential phase" just before they burst. Like Japan in 1989 or the Internet in early 2000.

"My colleagues," wrote Grantham, "suggest that this global bubble has not yet had this phase and perhaps they are right. ... In which case, pessimists or conservatives will take considerably more pain."

Enjoy the "must come down" phase.

http://www.thestreet.com/funds/follo.../10353243.html

[MtnBiker]

link?

[loosecannon]

link?

whoops! fixed, thanks

[Yurt]

But Dick Cheney's financial advisor knows better and points at you and laughs:



Enjoy the "must come down" phase.
http://www.thestreet.com/funds/follo.../10353243.html

That's a lousy thing to say.

[loosecannon]

That's a lousy thing to say.

Not to folks riding the false euphoria of a fake economic trajectory.

It would be much more cruel to say, enjoy the excellent economy.

[Hobbit]

So, because the economy won't be good forever, that makes it bad? I'm trying to follow your logic here, but nothing good lasts forever, and I don't recall that meaning that nothing can possibly be good.

It is also not necessarily true that the bigger the rise, the harder the fall. Such crashes have happened before, but they are the exception, rather than the rule. It is also worth noting that the stock market averages about 12% over any 10 year period in history, and any 5 year period that does not include the 1929 crash.

[Psychoblues]

Here is a quote from Mr. Grantham that you need to pay very close attention to:

"The more leverage you take, the better you do; the better you do, the more leverage you take. A critical part of a bubble is the reinforcement you get for your very optimistic view from those around you."

Kinda reminds me of the ramp up to the WAR ON IRAQ. With equal consideration it tells me that credit is not forever. Do any of you psuedo-economists want to tackle this? How about the nationalists that want to be worldists? You want to tackle it?

Does anyone understand even what Mr. Grantham means by "bubble?" I doubt it.

[loosecannon]

So, because the economy won't be good forever, that makes it bad?

Do you understand what a bubble is Hobbit? Think Nasdaq 2001.

Do you have a clue what a worldwide bubble is across every sector of the financial spectrum?

The worlds best and brightest economists don't know what the net results will be, we are in unchartered territory. And LOTS of folks think that they have devised a way to buck trends that have always prevailed.

But lemme spell out the worse case scenario:

In the era after 1929 we reached a mere 25% unemployment and the depression spread world wide.

Worse case is this depression "could" be 3-15 times more massive.

The leveraging we are experiencing today along with the debt load on nations, central banks,iinvestors and consumers is astronomical compared to 1929.

And leveraging is blamed as the cause of the last depression.

Do you trust Dick Cheney's financial advisor?

Bubbles inflate and then deflate. Like the crash in 2001. What goes up, must come down.

This bubble is at least 20 times as large as the 2001 bubble that sparked a recession.

[Psychoblues]

Good analogy, lc. Many look at the pendulum that forever swings without the due consideration of the momentum that generates the swinging.

Do you understand what a bubble is Hobbit? Think Nasdaq 2001.

Do you have a clue what a worldwide bubble is across every sector of the financial spectrum?

The worlds best and brightest economists don't know what the net results will be, we are in unchartered territory. And LOTS of folks think that they have devised a way to buck trends that have always prevailed.

But lemme spell out the worse case scenario:

In the era after 1929 we reached a mere 25% unemployment and the depression spread world wide.

Worse case is this depression "could" be 3-15 times more massive.

The leveraging we are experiencing today along with the debt load on nations, central banks,iinvestors and consumers is astronomical compared to 1929.

And leveraging is blamed as the cause of the last depression.

Do you trust Dick Cheney's financial advisor?

Bubbles inflate and then deflate. Like the crash in 2001. What goes up, must come down.

This bubble is at least 20 times as large as the 2001 bubble that sparked a recession.

This will not be the first or even the 1,000th time the suckers have paid the price for swingers. They were warned.

Get your kicks on Route 66.

[Hobbit]

Do you understand what a bubble is Hobbit? Think Nasdaq 2001.

Do you have a clue what a worldwide bubble is across every sector of the financial spectrum?

The worlds best and brightest economists don't know what the net results will be, we are in unchartered territory. And LOTS of folks think that they have devised a way to buck trends that have always prevailed.

But lemme spell out the worse case scenario:

In the era after 1929 we reached a mere 25% unemployment and the depression spread world wide.

Worse case is this depression "could" be 3-15 times more massive.

The leveraging we are experiencing today along with the debt load on nations, central banks,iinvestors and consumers is astronomical compared to 1929.

And leveraging is blamed as the cause of the last depression.

Do you trust Dick Cheney's financial advisor?

Bubbles inflate and then deflate. Like the crash in 2001. What goes up, must come down.

This bubble is at least 20 times as large as the 2001 bubble that sparked a recession.

The crash of 2001 had another cause. Care to guess what it was? I also don't really see any need to fear a huge crash. I've seen people predicting that we were mere months away from another black tuesday since 1994. This is not the .com boom or the 1920s artificial stock price age, which were both unsustainable.

I would also like to point out that anybody who thinks the stock market is a long-term risk is a complete and total moron. Since its founding, the stock market, as a whole (which means stock-based mutual funds and any group of stocks spread out across the market), has increased an average of at least 12% per year over any given five year period, except those which contained the crash of 1929. Extend that to 10 years, and even the decades including the 1929 crash saw an average 12% growth rate per year (those who held their stocks through the crash got excellent returns a few years later). Inflation averages out to around 4% per year, so the stock market will always beat inflation.

[Psychoblues]

First off I will name the United States Postal Service that can still deliver a letter in many cases overnight for 39 cents. No postal service on Earth can do better, cheaper or more consistently.

Secondly, I would like to point out the Veterans Administration Hospitals, Health Care Clinics and Convalescent Homes. There are no other such administrations or health care entities on Earth that can claim the successes, the quailities of services or the amount of services provided for so many at any price lower than that which the VA operates and provides direct benefits to our most important citizens, our VETERANS!!!!!!

Thirdly, I would recommend that you take a hard look at the TVA (Tennessee Valey Authority) and what it does for flood control and power production and the coststo the peoples it benefits. With that, please look at the Army Corps of Engineers that do the same as well as riverbed dredging, dam building and resource management. The Bureau of Land Reclamation is another to look at in this venue.

Fourthly, have you ever known of a public/municipal water/sewage entity that didn't at least double the price paid for their services within 5 years of going "private?" Even though other publicly managed municipals around them remained approximately level?





"Name one thing the government does better than the private sector and I'll show you something that requires the use of force to accomplish."

I won't name one thing for you, hibbit. I'll name a thousand. Do you desire to continue your idiocy and ignorance or would you rather take an honest look at what government can do well and what it doesn't?

[OCA]

Loose leave the board unless you come to the queer marriage thread you big fucking pussy ass hypocrite you.

I OWN YOU!

Don't post anywhere else, your credibility is in tatters.

[Hobbit]

First off I will name the United States Postal Service that can still deliver a letter in many cases overnight for 39 cents. No postal service on Earth can do better, cheaper or more consistently.

Secondly, I would like to point out the Veterans Administration Hospitals, Health Care Clinics and Convalescent Homes. There are no other such administrations or health care entities on Earth that can claim the successes, the quailities of services or the amount of services provided for so many at any price lower than that which the VA operates and provides direct benefits to our most important citizens, our VETERANS!!!!!!

Thirdly, I would recommend that you take a hard look at the TVA (Tennessee Valey Authority) and what it does for flood control and power production and the coststo the peoples it benefits. With that, please look at the Army Corps of Engineers that do the same as well as riverbed dredging, dam building and resource management. The Bureau of Land Reclamation is another to look at in this venue.

Fourthly, have you ever known of a public/municipal water/sewage entity that didn't at least double the price paid for their services within 5 years of going "private?" Even though other publicly managed municipals around them remained approximately level?





"Name one thing the government does better than the private sector and I'll show you something that requires the use of force to accomplish."

I won't name one thing for you, hibbit. I'll name a thousand. Do you desire to continue your idiocy and ignorance or would you rather take an honest look at what government can do well and what it doesn't?

All of those are done through the use of force, as they require tax money, which is collected through the use of force, to accomplish.

I also challenge you on the Post Office and the VA. You're bringing 'cost' into it without including tax cost. Federal Express and UPS deliver packages and notes far faster and with far less risk of damage that the Post Office, and at less cost. As for letters, who uses those any more? We have e-mail.

On the VA, I know several veterans, and the VA system is terrible. It's not 'free' either, unless you spell free 'T-A-X.' It provides inferior care at a greater cost per patient, all paid for by the U.S. taxpayers.

As for sewage and water systems, yeah, once again, the reason the city can operate at lower cost is because they subsidize their own departments with tax money, eliminating the need to be profitable.

[loosecannon]

This is not the .com boom or the 1920s artificial stock price age, which were both unsustainable.

No this is much, much much larger than the dotcom boom and the 1920's stock market bubbles.

It is worldwide, across all markets from realestate to oil, and it involves 100 times more debt.

I would also like to point out that anybody who thinks the stock market is a long-term risk is a complete and total moron.

Then there are a LOT of highly paid morons working in the financial industry. You should prob let them all know that you know better, starting with Dick Cheney. Let him know he is wasting his money on bad management.

I am sure he will listen to you.

Inflation averages out to around 4% per year, so the stock market will always beat inflation.

The first phrase does not beget the latter. The stock market is a risk. Even your broker will tell you that past results are no guarantee of future performance.

What goes up, must come down.

[darin]

I like the economy. My pay is 160% of what it was 5 years ago. Definately ahead of the cost of living...not counting gas prices.