Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19
Gold Price Gann Angle Update - 10th July 19
Crude Oil Prices and the 2019 Hurricane Season - 10th July 19
Can Gold Recover from Friday’s Strong Payrolls Hit? - 10th July 19
Netflix’s Worst Nightmare Has Come True - 10th July 19
LIMITLESS - Improving Cognitive Function and Fighting Brain Ageing Right Now! - 10th July 19
US Dollar Strength Will Drive Markets Higher - 10th July 19
Government-Pumped Student Loan Bubble Sets Up Next Financial Crisis - 10th July 19
Stock Market SPX 3000 Dream is Pushed Away: Pullback of 5-10% is Coming - 10th July 19
July 2019 GBPUSD Market Update and Outlook - 10th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Viral Bubbleomics: Debt infected Housing infected Oil …Now Gold

Stock-Markets / Liquidity Bubble Feb 14, 2011 - 04:15 PM GMT

By: Andrew_Butter

Stock-Markets

Best Financial Markets Analysis ArticleThis article, references two articles put out recently, one on oil and one on how America has been financing its trade deficit. The only place that published them was Market Oracle:


http://www.marketoracle.co.uk/Article24849.html
http://www.marketoracle.co.uk/Article26271.html

The editor of one of the places that rejected the articles kindly explained that the articles were, (I paraphrase), “much too complicated for their readers”.

This is going to be real simple, as in, “Hey kiddo…let’s play, Spot the Bubble”.

You can spot a bubble pretty easy after it happened; trick is to spot them before they pop.

See the red line, that’s the oil bubble (expressed as a percentage of what USA spent on oil imports from 2000 to 2004); remember that? Then there was a bust….then it came back (as predicted) to precisely the square root of the top multiplied by the bottom which is another characteristic of bubbles.

But I bet you are wondering what’s that blue line…looks like a bubble dun it?

But what is it? Well you can find that line on the Bureau of Economic Analysis website, click on “Table 1. U.S. International Transactions” then find Line 55 which is called “Foreign-owned assets in the United States, excluding financial derivatives (increase/financial inflow ()”, which is basically the amount of foreign debt that America piled on every quarter so that it could pay for its trade deficit.

That looks like a bubble, in Q2:2007 it hit  $700 billion, which makes TARP look like a walk in the park (ONE quarter remember).

That was a bubble…in debt, or put that another way, bubbles typically happen when people borrow money to pay too much for things. And that was one of the things; a very important thing; that caused the housing bubble…then that bust and then, woe and behold….the virus went to oil.

And now…this is a test…spot the bubble!!!

Of course all bets are off if the Saudi’s decide that $150 WTI is “fair”.

By Andrew Butter

Twenty years doing market analysis and valuations for investors in the Middle East, USA, and Europe; currently writing a book about BubbleOmics. Andrew Butter is managing partner of ABMC, an investment advisory firm, based in Dubai ( hbutter@eim.ae ), that he setup in 1999, and is has been involved advising on large scale real estate investments, mainly in Dubai.

© 2011 Copyright Andrew Butter- All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Andrew Butter Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

dincer
15 Feb 11, 09:35
What else can a central banker do?

Mr. Butter, if you put yourself in a Chinese central banker's place, what would you do? Wouldn't you decide to increase your gold holdings? I think you surely would. When WWII ended US Treasury had owned 35% of world above-ground gold, today this ratio is under 5%. Is it any wonder why US dollar became world's #1 reserve currency at Bretton Woods, China is surely getting prepared to internationalize the yuan via owning as much as gold she can. China is following the same path FDR had followed. Probably China will seize her citizens' private gold in the next decade, just like Roosevelt. (to some economists China is the #1 short at paper gold markets. it is in China's best interests to increase physical holdings by shorting gold at Comex)

For an ambitious sovereign state like China or Russia, gold's price is not important. The important thing is how much gold she does possess. If China is offered 5,000 metric tonnes of gold at a price of $2,000 per ounce, she will be very very pleased as long as the deal remains secret. (the cost of deal is only 11% of her forex reserves) Let's not forget the fact that gold is in limited supply. When gold shortages become acute it will affect everything in the monetary realm. Gold is not money for an ordinary citizen, but it is money for central banks, governments, bankers and financial community. Thus to avoid a catastrophic precious metals shortage, world's nations must introduce gold as a monetary asset along with well-managed fiat currencies. Gold must circulate within the financial system. Gold must be deposited in banks and it must pay interest. Make no mistake, we will certainly use ,or have to use, fiat currencies to meet our daily needs as long as "bad money" circulates. But gold and silver are being constantly ignored and demonetized as "ordinary commodities", "good money" namely gold and silver, will be hoarded and hidden, and this is not a desirable situation. In short, till excessive debt is wiped out from the system and ambitious sovereign nations give up accumulating gold, gold is not in a bubble.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules