I love listening to the financial world during times of chaos. Everything has a silver lining:
Goldman says little impact from a Japan disaster on the US.
Kudlow was talking today about how great the markets performed over the last few days as if the S&P was his youngest kid and the chaos from all areas was a pee-wee baseball game.
I am really starting to see a glass that is half empty at this point, and it is NOT just because of Japan.
First and foremost, Japan is in trouble. The Bank of Japan is printing money like no tomorrow to keep the panic controlled and the nuclear issues, which may be a little exaggerated, are not going away when (or if) they get the reactors online. The effects of the quake, tsunami and nuclear disaster will plague Japan for a long time and will most likely send the country into a very deep recession. Why-- same reasons why recessions always happen-- real estate, energy and unrest. Real estate will crash in this area of Japan. Energy is a gimmie here. Unrest will come from the displacement of Japanese who are laid off, living in poor conditions or who have experienced loss.
I say Japan is just the icing on the cake. The majority of the world was already falling back into near recession, so why not have a MAJOR event to kick off the party? I'll bring the keg.
It's still just about real estate
I am pretty sure we are starting to see cracks of the next real estate bust-- they are 100% apparent here at home in the US (no need for another link on US real estate sucking wind-- you know the situation), but may parts of the world have been stimulating their economies through the last recession with the same deadly drugs Greenspan et al used to bring on the recession-- easy credit for real estate.
Here is a great video from Mike Maloney in front of a DEAD 9 building super complex in Russia that I can only imagine was set to cost many but-zillion rubles. While I don't see eye to eye on Mike's 'gold to 15,000' views, his real estate predictions are very spot on based on excessive lending without demand.
Real estate is predictable, but every boom is followed by the 'it is different this time' crap. The crap is about to hit the fan and the result will be the same-- loss of wealth, restricted credit and massive job losses that leads to the 'unforseen' recession.
I recall an article in 2005 declaring the new state bird of Florida was the building crane. Funny really-- the pun and the irony of that declaration (ironic as many cranes are endangered species).
If you think it is different this time in Australia, Canada, China and Brazil, please read a great Bloomberg piece on Miami in 2007-- Miami Article Bloomberg
The oversupply will force prices down as much as 30 percent, the worst decline since the 1970s, and help push Florida's economy into recession as early as October, said Mark Zandi, chief economist at West Chester, Pennsylvania-based Moody's Economy.com, who owns a home in Vero Beach, Florida.I'm sure someone called Mr. Zandi high in 2007...
They were correct-- Miami's condo prices fell closer to 50%-60% when the market crashed.
Real estate is the real reason the next bear starts. When real estate crashes, jobs are lost in numbers that make your head spin and commodities follow on the way down.
Pick your poison...
Japan may have a nuclear disaster, but the global real estate meltdown is just beginning.