Juggling Dynamite

The cruelest part of treacherous pricing cycles in asset markets is that the longer they persist, the smarter the reckless, oblivious and sociopathic players appear and the more the naive, gullible and greedy are sucked in–the more carnage is ‘locked-in’ for the future. The universal truth was ever thus: the higher the price we pay, the less we will receive in compensation and the more likely we will evaporate large chunks of savings in the process. Time to wake up. Wake up…before it’s too late, again.

This article from The New York Times yesterday reminds those who wish to see of the truly global nature of present asset bubbles. See: Welcome to the everything boom, or maybe everything bubble.

“Around the world, nearly every asset class is expensive by historical standards. Stocks and bonds; emerging markets and advanced economies; urban office towers and Iowa farmland; you name it, and it is trading at prices that are high by historical standards relative to fundamentals. The inverse of that is relatively low returns for investors.

…Safe assets, like United States Treasury bonds, have been offering investors paltry returns for years, ever since the global financial crisis. What has changed in the last two years is that risky assets, like stocks, junk bonds, real estate and emerging market bonds, have also joined the party.

Want to buy shares of American companies? At the current level of the Standard & Poor’s 500 index, every dollar invested in stocks buys you about 5.5 cents of corporate earnings, down from 7.4 cents two years ago — and lower than just before the global financial crisis in 2007-8.

Also see the story slide show here for an overview.

The credit bubble bought hideous waste and mis-allocation of capital to non-productive, short-term speculation. This has left an aftermath of market saturation and excess capacity hangovers in real estate, retail, malls, restaurants, vacation services, golf courses…not to mention gambling facilities. This month NJ Governor Chris Christie noted disappointing gaming tax revenues as contributing to large revenue shortfalls in the state’s budget and opted to divert $1.56 billion in required state pension contributions to balance the budget. Taking from future coffers by spending in the near-term has been the dominant fiscal strategy all over the world the past 15 years. Now the future has arrived and it is full of capital and income holes pretty much everywhere.

Atlantic City’s 5-year revitalization plan in doubt as gaming revenues drop 45% since 2006. Here is a direct video link.

Now we are getting somewhere useful…

Struggling to compete with rivals in South Korea or China in businesses like televisions and smartphones, a range of Japanese electronics giants are converting idled factories to agriculture. Here is a direct video link.