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The Megabubble Poll

Posted By Barry Ritholtz On July 8, 2005 @ 2:30 pm In Commodities,Economy,Markets,Psychology,Real Estate | Comments Disabled

Paul Farrell [1] proposes a "Megabubble Poll"  — how many of these do you think are  bubbles.   All, some or none?

Real estate bubble. Clues: Speculators driving prices. Lenders offer cheap money, short-term loans. Home-equity loans fund short-term spending. Fed chairman sees minimal froth.

Energy and oil bubble. Clues: Crude hits another record. Political turmoil in oil-producing nations. Consumers buy gas-guzzlers at record pace. GM, Ford in trouble.

Foreign-trade deficit. Clues: Monthly deficits top $50 billion. This year’s deficit will beat 2004′s $617 billion. Foreigners now own $2.5 trillion of America.

Federal-budget deficit. Clues: Federal debt now $7.8 trillion; add another $400 federal deficit this year.

Corporate pensions underfunded. Clues: Airlines, auto, other manufacturers heavily burdened, default to taxpayers.

Local government pensions deficits. Clues: A near $400 billion mess draining local taxpayer resources.

Weak U.S. dollar. Clues: Fear China and other foreign powers will replace dollar reserves. Warren Buffett now betting $20 billion on foreign-currency hedging.

Social Security deficit. Clues: No choice, cut benefits or raise taxes; politicians hate both, so it’ll get worse.

Health-care costs. Clues: Burden shifting to employees. Costs above inflation. 43 million uninsured.

Medicare deficit. Clues: Going broke faster than Social Security. Prescription drug benefit added an unfunded $8.1 trillion. Long-term estimates over $36.6 trillion.

Personal-savings shortfall. Clues: We consume not save. National savings rate is zero, down from 8% two decades ago. Average household net worth less than $15,000, excluding home equity.

Consumer debt bubble. Clues: We’re living beyond our means. Consumer debt at $2 trillion. At 13%, household interest as a percent of income is at all-time high. Personal bankruptcies rising.

War and defense deficit. Clues: Iraq and Afghanistan wars cost over $200 billion a year, $2 trillion a decade.

Homeland insecurity. Clues: Minimal legislation to protect ports and chemical plants. Federal budget even cut border patrol 90%. Vigilantes patrolling.

Class gap widening. Clues: Superrich and CEOs getting increasing share of wealth, ownership and tax cuts.

Congressional pork. Clues: Both parties act like teenage addicts on a spending spree with stolen credit cards. By not using the veto, the administration acts like a parent who needs Nanny 911.
International credibility. Clues: Image problems: Post-9/11 imperialism, WMDs, Abu Ghraib, Gitmo and more.

Junk mailings. Clues: Mail solicitations increasing for credit cards and hot stock newsletters.
New "Mad Money" cable show. Clues: Frantic, manic entertainment; 1990s irrational exuberance again.

Numerous key mini-bubbles. Environmental, resources, technology, educational, outsourcing, jobs, you pick!

Now total up your scores on these individual bubbles. If your total is 50 points or more, you see a megabubble dead ahead. Prepare accordingly. If you’re close to 100 points, consider a very conservative strategy.

The Global megabubble? You decide [1]
By Paul B. Farrell
MarketWatch, June 26, 2005  6:43 PM ET

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[1] Paul Farrell: http://www.marketwatch.com/news/story.asp?dist=&param=archive&siteid=mktw&guid=%7B96AA9068%2D43FC%2D4FEC%2DBE52%2D7011528EA798%7D

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