It’s Bubble Time! Wisdom and Discipline Will Separate Winners From Victims

Editor's Note: The following is a guest post by Chris Martenson with PeakProsperity.com.

It's impossible to predict with certainty how much more insane our financial markets will get before an inevitable correction. But my personal bet is: A lot!

For my reasons why, take a few minutes to watch the chapter on bubbles below from The Crash Course. For those who haven't seen it before, the takeaway is this: bubbles pop only when greed in the market has been exhausted:

Bubbles make no sense economically. Or rationally. But they happen all the time as a part of the human condition.

Even while financial bubbles are enabled by dumb monetary and banking decisions, their actual genesis is rooted in primal human emotions. Greed on the way up, and fear on the way down.

The hardest part about these bubbles is not being swept up in them. As the above video shows, history is chock full of asset bubbles. We humans just never seem to learn. Like Charlie Brown's endless attempts to kick Lucy's football, we get suckered in by the promise of easy riches, only to end up flat on our back when the market suddenly yanks that promise away.

Wash, rinse, repeat.

Most of you reading this might be thinking “Hey, I’m a reasonable, intelligent person. I won't fall victim to the next bubble.” Perhaps, but maybe not. The numbers say that the majority of you will. Unfortunately, being smart -- even a genius -- is no protection against being ruined by a bubble.

Remember from the video that even Sir Isaac Newton, easily one of the most brilliant humans ever to live, got his clock cleaned by the South Sea Bubble:

Bubbles are much easier to enter than to exit. As they build, all your friends and neighbors are diving into the pool and enjoying easy riches. You deserve some of that good fortune, right? And there will be plenty of eager parties willing to help you get on the bandwagon.

But when the bubble pops, though, action becomes much harder to take. At first, everyone assumes that the sudden drop is a temporary aberration and that the party will shortly resume. As prices fall further -- and they typically fall at a faster rate than when they were rising -- folks become paralyzed by fear on the way down, slowly realizing that their paper profits may indeed be gone for good. At first they're unwilling to give up the dream of the "sure thing" they so recently had, and then, once the losses start mounting, they find themselves resistant to locking in those losses by selling. Instead, they hold on to the increasingly threadbare hope that prices will at least recover to where they can ‘get their money back.’

Of course, that never happens. For all those who bought in during the mania, their money was hopelessly betrayed the moment they placed their bet. And that’s what bubbles are – merely bets. And that bet is: I bet I can get out before everyone else.

That’s mathematically impossible for the majority. It’s really only possible for a very tiny few who have the vision and the discipline (and more often than not, the luck) to pull it off. Very rare are the people who get out at the top.

Don't Be A Victim

So, to avoid becoming victim in the future, the first thing you need is the clarity to know when you have a bubble on your hands.

Well, it really doesn’t get any clearer than this:

Why Toronto (and Other Cities) Inflate Housing Bubbles to the Bitter End

Feb 20, 2017

“Let’s drop the pretense. The Toronto housing market and the many cities surrounding it are in a housing bubble,” Bank of Montreal (BMO) Chief Economist Doug Porter told clients in a note last week.

Many have called it “housing bubble” for a while, but now it’s official, according to BMO.

In January, the benchmark price and the average price were both up 22% year-over-year, with the average price of detached homes up 26%, of semi-detached homes 28%, of townhouses 27%, and of condos 15%. Double-digit price increases have become the rule in recent years.

But this jump was “the fastest increase since the late 1980s – a period pretty much everyone can agree was a true bubble – and a cool 21 percentage points faster than inflation and/or wage growth,” Porter explained in his note, cited by BNN.

Holy smokes! Or rather, what are people smoking up there? Bubble weed, or something. A 22% yr/yr gain? On top of a string of recent years of double-digit gains?

Here are two more features about bubbles we need to keep in mind:

1. Bubble exist when prices rise beyond what incomes can sustain

2. Bubbles always have a blow-off top

First, house prices rising a ‘cool’ 21 percentage points above wage growth over a single year is the very definition of bubble behavior. Simple math tells us that anyone who borrows to buy property eventually has to pay that loan back.

The money to pay back that property loan comes from wages. Ergo, property prices and wages cannot depart from each other forever, or even for very long, without a lot of repayment defaults resulting.

As for ending in a "blow-off top", that's just how history tells us bubbles finally exhaust themselves. They draw in every last sucker and lazy-thinking ‘investor’ until there's no "greater fool" left willing to pay a higher price. This doesn't require 100% participation from the local population; only 100% participation from everyone who can be drawn in. When that finally happens, that’s when the bubble bursts all of its own accord.

There's another way for a bubble to end, but it practically never happens. Responsible bankers and lenders could prevent the bubble's formation by simply not lending ridiculous amounts. It almost never happens for the same reasons that people buy overpriced houses: greed and our social programming to follow the herd. If all your banker buddies are making big bucks writing loans to anyone who can fog a mirror, then you'll be rewarded for doing the same. Nobody wants to be the lone, unpopular voice urging restraint when the crowds are going wild.

The quotes below from the 1850’s show how this dynamic is nothing new to society:

“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, one by one.”

“In reading The History of Nations, we find that, like individuals, they have their whims and their peculiarities, their seasons of excitement and recklessness, when they care not what they do. We find that whole communities suddenly fix their minds upon one object and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first.”

―Charles Mackay,in Extraordinary Popular Delusions and the Madness of Crowds

Well, the good people of Toronto -- as well as Vancouver, Palo Alto, Melbourne, and a large number of other real estate markets -- have fixed their minds on the delusion that the recent skyrocketing price appreciation means that home prices will continue to always rise from here. So get in now! You can't lose! Don't risk getting priced out of the market!

What particularly crazy about this is that we just saw 10 short years ago how this movie ends. But those caught up in the current mania simply aren't thinking logically right now. They're fully captured by the bubble mania.

And, as before, it’s lonely out here for those of us trying to be the voice of sanity and reason. Nobody want’s to hear that now.

And later, once the painful correction has wrought its destruction, those of us who dared to sound an alert may be blamed as responsible for the losses - as if by pointing out the delusion we caused the burst to happen.

Conclusion

I could go on and on, risking being the boy who cried wolf, and point out all the other obvious bubbles infecting our financial landscape that all but assure a very difficult future of financial and economic pain.

But I won’t at this time, having already pointed out the major bubbles in last week's article, The Mother of All Financial Bubbles.

The delusion much of society wants to believe in is that we can get something for nothing. That is, to become rich, all we have to do is buy an asset like a house or Apple stock and simply wait.

The wealth will just magically arrive. No work performed, nothing new created, nothing done. Just buy, and wait.

Of course, even a cursory examination of all of life in nature (or before humans invented thin-air money printing) quickly reveals that actual wealth comes from hard work, usually coupled with taking risks.

But somehow we’ve slipped back into the common and very human delusion of that our current culture has somehow figured out how to escape the old bonds of wealth creation. This time is different!

The Romans re-minted coins in smaller and less pure weights and it worked! For a while. Then its empire collapsed on itself.

Zimbabwe (and now Venezuela) printed and it worked! For a while. Then its citizens were left impoverished.

Society's dangerous conceit is in thinking that somehow we’ve managed to, this time, escape the hard rules of wealth creation and have discovered a new principle by which we can all get wealthy without doing anything at all. All you have to do is play the game. Put your money to work! Buy stocks and houses and you can't go wrong!

And it’s working! For now.

But when we back up a bit, it’s pretty easy to see how this cannot be true. Not for the majority. Why? Because real wealth isn't a paper gain on a house. Nor is it even money in the bank. Or a large stock portfolio.

Real wealth consists the final things you consume: food, appliances, transportation, entertainment, clothes, energy, etc.

Those are real things. They have to come from somewhere. Which means they have to be produced, stored, transported, and sold. By themselves, your cash and your stock portfolio have no value. Those are merely claims on true wealth.

So how can it be possible for everyone to be exponentially increasing their claims on real wealth, without the underlying pie of real wealth itself, increasing at an equivalent rate?

It’s not.

And that’s the painful lesson that gets learned and re-learned as each new generation gets duped and then dumped by an asset bubble.

Sadly, bubbles used to happen only once in a generation. Once those burned by the last bubble have died off, the younger generation has no living memory to prevent them from getting suckered by the next one. But for some reason, our current generation has something of an addiction to bubbles. We've lived through the tech stock bubble, the real estate bubble, and now we're living inside the 'everything' bubble.

What's wrong with us?

My advice is to sell your house if you live in Toronto, or a similarly bubblicious real estate market. Similarly, reduce your exposure to stocks and bonds at these record highs, and develop a wealth protection strategy with a financial adviser who understands the risks in today's markets.

Know what the bubble signs are and be smarter than Newton by standing aside, nodding knowingly, and tolerating your "smart" friends and neighbors.

It’s one of the very hardest things to do, but it’s also one of the most important.

Odds are high you'll be proven the smart one once the current bubble bursts.

And if you haven't read it yet, read our report How Bad Will It Get? in which we detail the tremendous scale of the losses that will result when this Mother Of All Financial Bubbles collapses. It will be a traumatizing time for society, and many, many people will see their wealth vaporize.

The key objective at this time is to position yourself for physical and financial safety. For those who do will be in a position to prosper greatly, as well as offer much-needed support to others, when the coming reset arrives.

In just the past few days, the Senate passed an unprecedented $740 billion spending bill amid an inflation crisis, we found out that the IRS purchased nearly $700,000 worth of guns and ammo ahead of plans to hire 87,000 new "enforcement" agents, and on Monday the FBI raided the home of a former U.S. president. It's pretty safe to say that there's a whole lot going on in this country that we've never seen before, and conservatives had "better wake up," said Glenn Beck on "The Glenn Beck Program."

"This is the beginning of an entirely new kind of America. And when it is all implemented, look out! The only other thing that I think [Democrats] could do to really polish us off is [use] emergency orders. If [President Joe Biden] goes for emergency orders and declares a national emergency over the weather, we're going to be cooked," Glenn said.

Glenn went on to explain why he believes a new "season" is on the horizon for our nation, but it’s not all bad news. He said he's hopeful for a new class of politicians to enter Washington, D.C., and, while no politician is perfect, a few such as Florida Governor Ron DeSantis can still surprise us.

DeSantis always seems to be ahead of the curve on hot-button issues, and he tackles them the legal way without abusing his power. Just look at how much the media is trying to paint him as evil. That’s a telltale sign that "he’s on the right track, at the right speed. And he's taking all of it on," Glenn said.

Watch the video clip below to catch more of the conversation. Can't watch? Download the podcast here.





Here are 3 ways the 'Inflation Reduction Act' WILL impact you (Hint: NOT by reducing inflation)

(Left) Photo by Joe Raedle/Getty Images/(Middle) Kevin Dietsch/Getty Images/(Right)Andrew Harrer/Bloomberg via Getty Images

The Senate has passed President Joe Biden's $740 billion "Inflation Reduction Act" over the weekend, but the only way this deceptively-named bill will reduce inflation is by crushing your buying power. The massive spending bill includes the largest climate spending package ever passed and will allocate a whopping $80 billion to make the IRS bigger than the Pentagon, State Department, FBI, and Border Patrol combined. And just wait until you see how the bill will affect our farmers.

On the radio program Monday, Glenn Beck broke down three rather "terrifying" components of the 755-page bill and how they will impact you.

Watch the video clip below. Can't watch? Download the podcast here.

Want more from Glenn Beck?

To enjoy more of Glenn’s masterful storytelling, thought-provoking analysis, and uncanny ability to make sense of the chaos, subscribe to BlazeTV — the largest multi-platform network of voices who love America, defend the Constitution, and live the American dream.

CNN’s Brian Stelter had a shocking moment of clarity Sunday when he acknowledged what everyone but the liberal media has known since before the 2020 presidential election: President Joe Biden's son Hunter has been up to some seriously dubious dealings overseas, and his father was almost certainly involved despite his repeated claims to the contrary.

On "Reliable Sources" Sunday, Stelter spoke with first lady Jill Biden's former press secretary, Michael LaRosa, about whether Biden is likely to seek a second term in 2024.

“I hope he runs, and I know he’s going to run. I think he's planning to run ... I don't see why he wouldn't run,” LaRosa stammered.

"What about his son? What about Hunter?" Stelter cut in. “Hunter [is] under federal investigation, charges could be coming at any time. This is not just a right-wing media story. This is a real problem for the Bidens."

Unluckily for Stelter, "The Hill's" Joe Concha can remember all the way back to the fall of 2020:


On a recent episode of Glenn TV, Glenn Beck discussed the most recent findings in the Hunter Biden laptop scandal. Don't get distracted by the seemingly endless stream of scandalous photos and videos, Glenn warns, it's what's coming out about Hunter's overseas business dealings that should be all over the media, because Joe Biden is involved too.

Watch the video clip below or find the full episode here.

Want more from Glenn Beck?

To enjoy more of Glenn’s masterful storytelling, thought-provoking analysis, and uncanny ability to make sense of the chaos, subscribe to BlazeTV — the largest multi-platform network of voices who love America, defend the Constitution, and live the American dream

VOTE: You decide who gets a Badge of Merit (Round 3)

Public domain, via Wikimedia Commons

The Purple Heart in George Washington's time was not given for being wounded. This award went to ordinary soldiers for doing something of merit—something that would find favor in the eyes of God. Washington knew they couldn't win if they weren't on God's side. And if they were on God's side, God would bless them.

I've been looking for people who deserve a George Washington badge of merit. Many of you have submitted nominations. Thank you for the love, respect, and consideration you have shown in doing so.

From your hundreds of nominations, we have narrowed it down to three finalists. Now, it's up to you to decide who gets this honor.

Here are this week's candidates:

1. Dana, the Mom to Many

Dana and her husband Brian run a nonprofit called Dogwood Ranch in southwest Missouri. According to their website:

Dogwood Ranch was created by family, for family. We believe that everyone deserves the chance to live the life for which they were created. Our mission is simple: to provide support for survivors of trauma as they journey towards wholeness. This includes creating a new heritage for foster children and youth who have been abused and neglected, by providing them with safe and healthy forever families. We are also committed to offering a place of belonging for foster teens through individualized transitional living services. Additionally, we offer specialized support through our equine assisted counseling program, which focuses on bringing restoration to foster youth and other at-risk populations, including our honored military veterans and their families. Through the operation of Dogwood Ranch, our desire is to allow those we serve a new way to experience life, family and true redemption. Everyone deserves a chance to find their way home.

According to her nominator, on top of their work at the ranch, they personally foster young girls and have had "over twenty foster girls they now call family."

Her nominator wrote:

They take the toughest cases that come up. On several occasions, I would reach out to see if she could go out, and she would say she couldn’t because they were on suicide watch that night. Young girls have tried to stab her, have stolen her car, and have come to call her Mom…She is an incredibly hard worker, no-nonsense, and full of life and joy. She is constantly making our community and our world a better place.

2. Francine, the Joyful Servant

Francine, who also goes by “Frannie,” and “Fran,” not only has multiple names, but wears multiple hats. At home, she is the mother of two boys with serious disabilities. At work, she is a caretaker for the elderly, and everywhere she goes, she is a ray of sunshine.

Her nominator entrusted her mother, who has since passed, to Francine's care at a nursing home. She said, whenever Francine was working, she would breathe a sigh of relief. She wrote:

While most of the aides looked at the work as just a paycheck, and some of them were actually cruel to the most needy patients, Fran treated each and every one of them like royalty. She saw each individual as unique and worthy of love and understanding. Every patient adored her, because they knew they were in good hands.

Her nominator wrote that she saw treatment of elderly patients that “made her skin crawl.” There was a woman at the nursing home with severe dementia who had become so antagonistic that other aides, to avoid feeding her by hand, would simply not feed her. When Fran was working, she made sure to sit with her while she ate. She even hosted “dinner parties” with multiple residents to ensure they were fed, and happy.

Her nominator wrote:

When Fran was on shift, people who needed help going to bed never had to wait long. Besides, they didn't mind waiting for FRANNIE. She always did everything with such love and care and class! Then, after a long eight hours (or sometimes a double shift!) she would go home to more of the same routine. And in spite of it all, she did it all with a smile on her face. I've never known anyone like her. She was a godsend to my mother. If it hadn't been for her, and a handful of others, Mom's time at the home would have been unbearable. This woman really does deserve an award.

3. Michael, the Godly Father

Michael was nominated by his three children for modeling how a true man of God lives, loves, and serves his community. After serving as a corpsman in the Vietnam War and then working as an elementary school teacher, his children say he was the “solid, and consistently Godly male role model” in his grandchildren’s life. His children wrote:

My father helped raise his grandkids when my sister was a single mom, even though he had already raised his own kids.

Michael shares the gospel in one-on-one Bible studies with young people who have just gotten out of jail. He raises donations for clothing, food, and blankets for the homeless. He meets weekly with young men for Bible studies, to mentor them, and help them mature into men of God.

Michael has taught true love to his children by the way he treats their mother–his wife of 42 years. They wrote:

He is a solid rock of unwavering love for her, which has had a huge impact on how my brother and I treat our own wives. Mike's steadfast love for our mother has taught us the meaning of loyalty, love, commitment, sacred covenant, compassion, honor, and what a true husband looks like.

Most importantly, they say their father "instilled in us an absolute love for our Creator and compassion for our fellow man. He is our number one role model showing us what a godly man is.”

Who do you think deserves a badge of merit? Cast your vote below.