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.

Are your kids doing well in school? They might not be doing as well as you think.

A recent study found that the majority of parents in the US think their children are doing better in school than they actually are, and we largely have COVID to thank for that.

Due to the disastrous educational and social policies implemented during the COVID pandemic, millions of kids across the country are lagging and are struggling to catch up. They are further impeded by technology addiction, mental illness, and the school system, which is trying to mask just how bad things are. However, due to continued COVID-era policies like grade inflation, your kid's report card may not reflect the fallen educational standards since 2020.

Here are five facts that show the real state of America's youngest citizens. It's time to demand that schools abandon the harmful COVID-era policies that are failing to set our children up for success.

Gen Alpha is struggling to read

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Literacy is the foundation of education. Being able to read and write is paramount to learning, so when a young student struggles to gain literacy, it severely impacts the rest of their education. According to a 2021 report from the National Assessment of Educational Progress (NAEP):

In 2019, some 35 percent of 4th-grade students and 34 percent of 8th-grade students performed at or above NAEP Proficient.

This means that 65 percent of 4th-graders and 66 percent of 8th-graders performed below NAEP proficient. As to be expected, the effects of this lack of literacy are still being felt. A 2024 report called the "Education Recovery Scorecard" created by Harvard and Stanford researchers found that in 17 states, students are more than a third of a grade level behind pre-pandemic levels. Moreover, in 14 states, students are more than a third of a grade level behind in reading specifically.

Grade inflation

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If you thought the U.S. dollar was the only thing suffering from inflation, you would unfortunately be mistaken. Grades are also being inflated, caused by more lenient grading practices that began during the pandemic and have yet to return to normal. While students undoubtedly love this practice at the momentafter all, who doesn't like an easy A?in the long run, it only makes their lives more difficult.

This practice has seen attendance and test scores drop while GPAs rise, making it more difficult for colleges to decide which students to accept, as more and more students have 4.0s. Students are also less prepared for the increased workload and stricter standards they will face when they start college. Overall, there has been a decline in preparedness among students, which will inevitably cause issues later in life.

Failure is no longer an option (literally)

To mask just how ill-prepared students have become, some universities have decided to double down on their grading system. Some schools, like Oregon University, have decided that they will no longer give students failing grades. Instead, if a student fails a class, they will simply receive no grade, thus keeping their academic record blemish-freebecause heaven forbid a student should face the consequences of their own actions.

These universities are doing a real disservice to an entire generation of students. To cover up their failures, they are waving students through their programs, failing to prepare them for the world they will face.

Addiction to tech

Tech addiction has been a concern for parents since before the pandemic, but unsurprisingly, the lockdowns only made it worse. A 2023 study showed that internet addiction in adolescents nearly doubled during the lockdowns when compared to pre-pandemic numbers. This doesn't come as a surprise. Forcing kids to stay inside for months with the internet as their sole connection to the outside world is the perfect recipe for addiction to tech.

Mental illness

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The mental health crisis has been growing across the world for decades now, but it took a turn for the worse during the pandemic. Both a study from Iceland and Australia recorded a decline in the mental health of their youth during the pandemic, and a study out of San Francisco measured physical changes to the brains of children that resembled the brains of people who suffered childhood trauma.

5 SURPRISING ways space tech is used in your daily life

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Is your vacuum cleaner from SPACE?

This week, Glenn is discussing his recent purchase of a Sputnik satellite, which has got many of us thinking about space and space technology. More specifically, we've been wondering how technology initially designed for use outside Earth's atmosphere impacted our lives down here on terra firma. The U.S. spent approximately $30 billion ($110 billion in today's money) between the Soviet launch of Sputnik in 1957 and the Moon Landing in 1969. What do we have to show for it besides some moon rocks?

As it turns out, a LOT of tech originally developed for space missions has made its way into products that most people use every day. From memory foam to cordless vacuums here are 5 pieces of space tech that you use every day:

Cellphone camera

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Have you ever seen a photograph of an early camera, the big ones with the tripod and curtain, and wondered how we went from that to the tiny little cameras that fit inside your cellphone? Thank NASA for that brilliant innovation. When you are launching a spaceship or satellite out of the atmosphere, the space onboard comes at a premium. In order to make more room for other equipment, NASA wanted smaller, lighter cameras without compromising image quality, and the innovations made to accomplish this goal paved the way for the cameras in your phone.

Cordless vacuums and power tools

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When exploring the moon, NASA wanted astronauts to use a drill to collect samples from the lunar surface. The problem: the moon has a severe lack of electrical outlets to power the drills. NASA tasked Black & Decker with developing a battery-powered motor powerful enough to take chunks out of the moon. The resulting motor was later adapted to power cordless power tools and vacuums in households across America.

Infrared ear thermometer

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What do distant stars and planets have in common with your eardrum? Both have their temperature read by the same infrared technology. The thermometers that can be found in medicine cabinets and doctors' offices across the world can trace their origins back to the astronomers at NASA who came up with the idea to measure the temperature of distant objects by the infrared light they emit.

Grooved pavement

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This one may seem obvious, but sometimes you need a massively complicated problem to come up with simple solutions. During the Space Shuttle program, NASA had a big problem: hydroplaning. Hydroplaning is dangerous enough when you are going 70 miles an hour in your car, but when you're talking about a Space Shuttle landing at about 215 miles per hour, it's an entirely different animal. So what was NASA's space-age solution? Cutting grooves in the pavement to quickly divert water off the runway, a practice now common on many highways across the world.

Memory foam

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If you've ever slept on a memory foam mattress, it probably won't come as a shock to find out that the foam was created to cushion falls from orbit. Charles Yotes was an astronautical engineer who is credited with the invention of memory foam. Yotes developed the technology for the foam while working on the recovery system for the Apollo command module. The foam was originally designed to help cushion the astronauts and their equipment during their descent from space. Now, the space foam is used to create some of the most comfortable mattresses on Earth. Far out.

5 most HORRIFIC practices condoned by WPATH

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Whatever you know about the "trans movement" is only the tip of the iceberg.

In a recent Glenn TV special, Glenn delved into Michael Schellenberger's "WPATH files," a collection of leaked internal communications from within the World Professional Association for Transgender Health (WPATH). Glenn's research team got their hands on the WPATH files and compiled the highlights in Glenn's exclusive PDF guide which can be downloaded here. These documents reveal the appalling "standards" created and upheld by WPATH, which appear to be designed to allow radical progressive surgeons to perform bizarre, experimental, and mutilating surgeries on the dime of insurance companies rather than to protect the health and well-being of their patients. These disturbing procedures are justified in the name of "gender-affirming care" and are defended zealously as "life-saving" by the dogmatic surgeons who perform them.

The communications leaked by Schellenberger reveal one horrific procedure after another committed in the name of and defended by radical gender ideology and WPATH fanatics. Here are five of the most horrifying practices condoned by WPATH members:

1.Trans surgeries on minors as young as 14

One particular conversation was initiated by a doctor asking for advice on performing irreversible male-to-female surgery on a 14-year-old boy's genitals. WPATH doctors chimed in encouraging the surgery. One doctor, Dr. McGinn, confessed that he had performed 20 such surgeries on minors over the last 17 years!

2.Amputation of healthy, normal limbs

BIID, or Body Integrity Identity Disorder, is an “extremely rare phenomenon of persons who desire the amputation of one or more healthy limbs or who desire a paralysis.” As you might suspect, some WPATH members are in favor of enabling this destructive behavior. One WPATH commenter suggested that people suffering from BIID received "hostile" treatment from the medical community, many of whom would recommend psychiatric care over amputation. Apparently, telling people not to chop off perfectly healthy limbs is now considered "violence."

3.Trans surgeries on patients with severe mental illnesses

WPATH claims to operate off of a principle known as "informed consent," which requires doctors to inform patients of the risks associated with a procedure. It also requires patients be in a clear state of mind to comprehend those risks. However, this rule is taken very lightly among many WPATH members. When one of the so-called "gender experts" asked about the ethicality of giving hormones to a patient already diagnosed with several major mental illnesses, they were met with a tidal wave of backlash from their "enlightened" colleges.

4.Non-standard procedures, such as “nullification” and other experimental, abominable surgeries

If you have never heard of "nullification" until now, consider yourself lucky. Nullification is the removal of all genitals, intending to create a sort of genderless person, or a eunuch. But that's just the beginning. Some WPATH doctors admitted in these chatlogs that they weren't afraid to get... creative. They seemed willing to create "custom" genitals for these people that combine elements of the two natural options.

5.Experimental, untested, un-researched, use of carcinogenic drugs 

Finasteride is a drug used to treat BPH, a prostate condition, and is known to increase the risk of high-grade prostate cancer as well as breast cancer. Why is this relevant? When a WPATH doctor asked if anyone had used Finasteride "to prevent bottom growth," which refers to the healthy development of genitals during puberty. The answer from the community was, "That's a neat idea, someone should give it a go."

If your state isn’t on this list, it begs the question... why?

The 2020 election exposed a wide range of questionable practices, much of which Glenn covered in a recent TV special. A particularly sinister practice is the use of private money to fund the election. This money came from a slew of partisan private sources, including Mark Zuckerberg, entailed a host of caveats and conditions and were targeted at big city election offices— predominantly democratic areas. The intention is clear: this private money was being used to target Democrat voters and to facilitate their election process over their Republican counterparts.

The use of private funds poses a major flaw in the integrity of our election, one which many states recognized and corrected after the 2020 election. This begs the question: why haven't all states banned private funding in elections? Why do they need private funding? Why don't they care about the strings attached?

Below is the list of all 28 states that have banned private funding in elections. If you don't see your state on this list, it's time to call your state's election board and demand reform.

Alabama

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Arizona

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Arkansas

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Florida

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Georgia

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Idaho

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Indiana

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Iowa

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Kansas

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Kentucky

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Louisiana

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Mississippi

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Missouri

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Montana

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Nebraska

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North Carolina

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North Dakota

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Ohio

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Oklahoma

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Pennsylvania

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South Carolina

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South Dakota

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Tennessee

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Texas

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Utah

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Virginia

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West Virginia

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Wisconsin

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