Which One Goes Next?
There seem to be a couple of likely candidates for the next bubble to pop, among them commercial real estate, with its heavy dependence on (collapsing) retail sales, and government bonds, which are are intimately tied to (ballooning) government infrastructure spending.
The people I have talked to about commercial real estate (owners / investors) seem split on whether / when the commercial realty bubble will pop, or whether it will be a slow outgas followed by gradual recovery.
In contrast, no one that I have heard or conversed with is optimistic about government bonds. Talking to a municipal bond trader the other day, I remarked ” the infrastructure spending in the proposed stimulus has got to be good news for your business, right?” He replied to the effect that no, most people in the bond business are very concerned that there is in actuality a growing bubble in government debt, which the stimulus bill has every chance of making much worse.
So, how do you short government bonds again?
(Image from philadelphia reflections, a monetarist’s blog, unfortunately)
I think the credit card bubble will blow much earlier. One of the last steps will be the bursting of the US bonds bubble…
You are right, I hadn’t considered consumer credit card debt. Since it is harder to get these debts discharged since the 2005 Bankruptcy law, and I haven’t used them much since before then, I hadn’t considered it, it could be contained if not too bad, but if it gets away from them it will start a cascade of defaults because the bankruptcy courts ill be unable to keep up. The credit-card operations had better give themselves a haircut before Obama does.