The writers at the Babylon Bee..............

 

.....need to get out of their bubble every once in a while.

Unearned wealth has its risks...........

 

The broad inflation in the prices of bonds, stocks, real estate, cryptos and just about every other financial asset produced an extraordinary surge in wealth.  In the years between the stock market trough in early 2009 and the tenth anniversary of Lehman's bankruptcy, US household wealth nearly doubled.  By late 2018, American households were worth more than $100 trillion, a sum equivalent to five times US GDP.  By comparison, household wealth in the post-war decades averaged just over three and a half times GDP.  Total household wealth was higher than at its twin peaks in recent real estate and internet bubbles.  Never before had Americans been so rich.  Never before had they done so little to amass so much wealth.

-Edward Chancellor, The Price of Time: The Real Story of Interest

Bubble watch...........................

 

Two years ago everyone was convinced we were going into a recession. It was the most over-forecasted recession of all-time that never happened.

-Ben Carlson

On the separation of intent from reality.....

 The administrative state may operate in a bubble where blatantly bad ideas receive little or no substantial pushback. State officials seem disconnected from reality when they issue arbitrary orders that are unlikely to make a difference when applied in the real world.

-Michael Van Beek, as culled from here

via

Like this would ever happen............

 When everyone thinks central bankers, money managers, corporate managers, politicians or any other group are the smartest guys in the room, you are in a bubble.

-Doug Kass

Blowing bubbles................

 Explanation: Massive stars can blow bubbles. The featured image shows perhaps the most famous of all star-bubbles, NGC 7635, also known simply as The Bubble Nebula. Although it looks delicate, the 7-light-year diameter bubble offers evidence of violent processes at work. Above and left of the Bubble's center is a hot, O-type star, several hundred thousand times more luminous and some 45-times more massive than the Sun. A fierce stellar wind and intense radiation from that star has blasted out the structure of glowing gas against denser material in a surrounding molecular cloud. The intriguing Bubble Nebula and associated cloud complex lie a mere 7,100 light-years away toward the boastful constellation Cassiopeia. This sharp, tantalizing view of the cosmic bubble is a reprocessed composite of previously acquired Hubble Space Telescope image data.

-as cut and pasted from APOD

A different perspective...............................

 ..........................................................In praise of "bubbles."

On bubbles......................

“If possible, avoid being a bubble; for a bubble, even the gentlest touch is fatal.” 


-Mehmet Murat ildan

On the danger.........................

........................of bubbles of different sorts:

Diversity of thoughts and ideas, amicably and thoughtfully exchanged, are the ideals. All three of the cited writers want that.  Many more of us, including  "The resistance", ought to take up the banner.

-Peter Gordon, as borrowed from here

On car payments......................

Will the next financial crisis come from a bubble in auto lending? Ehh, I don't know, I think it would be a little too cute to have two U.S. financial crises in a row that are both precipitated by securitized loans to consumers to finance durable-goods purchases. Financial crises usually show more creativity than that. The next crisis will probably be in something weird, like clearinghouse collateral or bond market illiquidity. But "the country’s auto debt hit a record in the fourth quarter of 2016, according to the Federal Reserve Bank of New York, when a rush of year-end car shopping pushed vehicle loans to a dubious peak of $1.16 trillion," and "delinquencies among lower-rated borrowers have risen to the highest level since 2009," so if you want to worry about it go ahead.

While I have you here, though, I should say that a reader pointed out a glaring omission in my discussion of auto lending and smart contracts yesterday: self-driving cars! In the fairly near future, if you borrow money to buy a car, and you miss a payment, the car will just tootle on back to the dealer's lot. There'll be no GPS tracking or ignition override or anything messy like that; the car will just execute the contract itself. The future will be amazing, but also kind of tough.

-As culled from Matt Levine's wonderful blog

On universal beliefs.................

Mr. Seefer:  Okay, lets move away from derivatives now and talk about - I mean, you talked about several areas already today about your views on causes, or contributing causes to the financial crisis....

Mr. Buffett:  Well, I think the primary cause was an almost universal belief, among everybody - and I don't ascribe particular blame to any part of it - whether it's Congress, media, regulators, homeowners, mortgage bankers, Wall Street - everybody - that house prices would go up.  And you apply that to a $22 trillion asset class, that's leveraged up, in many cases.  And when that goes wrong, you're going to have all kinds of consequences.  And it's going to hit not only the people that did the unsound things, but to some extent the people that did the semi-sound, and then finally the sound things, even, if it is allowed to gather enough momentum on its own on the downside, the same kind of momentum it had on the upside.
      I think contributing to that - or causing the bubble to pop even louder, and maybe even to blow it up some, was improper incentives - systems and leverage.

-As excerpted from Warren Buffett's testimony before the Financial Crisis Inquiry Commission

On Kool-Aid drinking................

Mr. Bondi:   "...we're investigating the causes of the financial crisis.  And I would like to get your opinion as to whether credit rating agencies and their apparent failure to predict accurately...cause or contribute to the financial crisis?"

Mr. Buffett:   "It didn't cause it, but there were a vast number of things that contributed to it.  The basic cause, you know, embedded in psychology - partly in psychology and partly in reality in a growing and finally pervasive belief that house prices couldn't go down and everybody succumbed - virtually everybody succumbed to that.  But that's - the only way you get a bubble is when basically a very high percentage of the population buys into some originally sound premise and - it's quite interesting how that develops - originally sound premise that becomes distorted as time passes and people forget the original sound premise and start focusing solely on the price action.
      So every - the media, investors, the mortgage bankers, the American public, me, my neighbor, rating agencies, Congress - you name it - people overwhelmingly came to believe that house prices could not fall significantly.   And since it was the biggest asset class in the country and it was the easiest class to borrow against, it created probably the biggest bubble in our history.
      It will be a bubble that will be remembered along with the South Sea bubble and the tulip-bulb bubble."

-as excerpted from Warren Buffett's testimony in front of the Financial Crisis Inquiry Commission

Slowly.....................................

"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, and one by one."
Charles Mackay,  Extraordinary Popular Delusions and the Madness of Crowds

Unwholesome fermentation...........

    "During the progress of this famous bubble, England presented a singular spectacle.  The public mind was in a state of unwholesome fermentation.  Men were no longer satisfied with the slow but sure profits of cautious industry.  The hope of boundless wealth for the morrow made them heedless and extravagant for to-day."
-Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds

Mackey's excerpt is from his discussion of the South Sea bubble in 1720 England, but it could just as easily describe the 1637 Tulip Mania in Holland, The Mississippi Bubble in France in 1718, the Tech Stock bubble of 2000, or the 2003-2006 American real estate market.  Something about human nature...........

painting courtesy of