As Bob Hoye (Institutional Advisors) likes to quip, "In the beginning, the promoter has the vision and the public has the money. At the end, the promoter has the money, and the public has the vision." (cartoon here)

Today, the New York Times ran the Op-Ed "Why I am leaving Goldman Sachs" by Greg Smith a 12 year employee. In the exposé, Greg relates how Goldman Sachs refers to their clients as "Muppets"... a handy pejorative I suppose if you look at your clients as brainless puppets. Large clients who are herded into big yielding profits for Goldman Sachs are referred to as "Elephants" to be hunted down.

Note to Canadian buyers of pumped up real estate: Do your due diligence. As you can see from the graphic above, great real estate bubbles have an end date (Dubai and Ireland are only 2 of many examples) and that's usually when enough participants in the party on the way up start getting the "vision". 

For a better understanding of the sheer callousness of sellers at the peak read the 2 page Op-Ed from the New York Times "Why I am leaving Goldman Sachs" by Greg Smith "... the environment now (at Goldman Sachs) is as toxic and destructive as I have ever seen it."

British Foreign Secretary William Hague warned (in 1998 and again in 2011) that the Euro crisis is "a burning building with no exits". 
"It was folly to create this system, it will be written about for centuries as a kind of historical monument to collective folly. But it’s there and we have to deal with it." Daily Mail News article here from September 30, 2011.

Apart from the Euro Headlines that are buffeting the financial markets every week, many Eurone Zone members are in bubble territory when it comes to their local real estate markets.

To quote Jesse Colombo (thebubblebubble.com): "Could Sweden or Finland be the scene of the next European financial crisis? It is actually far likelier than most people realize. While the world has been laser- focused on the woes of the heavily-indebted PIIGS nations for the last couple of years, property markets in Northern and Western European countries have been bubbling up to dizzying new heights in a repeat performance of the very property bubbles that caused the global financial crisis in the first place. Nordic and Western European countries such as Norway and Switzerland have attracted strong investment inflows due to their perceived economic safe-haven statuses (Think Canada - BR), serving to further inflate these countries’ preexisting property bubbles that had expanded from the mid-1990s until 2008. With their overheating economies and ballooning property bubbles, today’s safe-haven European countries may very well be tomorrow’s Greeces and Italys." READ THE REST OF ANALYSIS HERE.

Impending Economic Collapse of 2012-2022 by John F. Carlucci DEC 8, 2011

The (series of) charts point to various long and short term scenarios for the market, several of which have a very high probability of coming to pass. Statistically, it is extremely unlikely that the mathematical patterns discussed here are simply due to random chance. Taken as a group it would seem to be virtually impossible. 

Although the patterns are mathematically driven and not dependent upon world events it is fascinating how current events seem to be aligning with the near term pattern. In particular, the S&P decline indicated for 2012 - 2013 coinciding with the very likely disintegration of the Eurozone and euro. Is there a silver lining for investors somewhere within this dark cloud?

Full text and charts of Part II HERE ~ Part I HERE

January 2012 - What happens when Boomers turn into Doomers? Harry Dent provides a road map here  or in the embedded Youtube file below.

October 2011 Charlie Rose interview Ray Dalio, head of the world's biggest (macro) hedge fund, Bridgewater Associates. 

Full text of the interview online at Zero Hedge or via PDF here.

3 Ingredients of Market Bubbles
"Innovation, speculation, and delusion have come together in bubble after bubble", says Financial Analysts Journal editor Rodney Sullivan. March 7, 2011 Text Version or Morningstar Video (7:19min):
http://www.morningstar.fr/fr/news/article.aspx?articleid=96355&categoryid=13 

My note: with respect to Canadian real estate we have a long history of central government risk suppression policies (via CMHC and the BoC) as prime manufacturer's of "innovation", and we have the resulting unbridled "speculation" via leverage (debt) as prices rise, and we have mass delusion in the form of the greater fool who will come along and pay an even higher price. BR  

This chart of U.S. Housing since WWII is the same old CyclePro forecast for the US residential housing bust. 

We are still on target for a rubber band snap down from the 2006 peak that should take the Case-Shiller index well below the historical low price channel trend line. Despite the Fed's multiple interventions to prop up housing prices, my forecast really does not need much adjustment. Steven J. Williams January 2, 2011 
www.cycleprooutlook.com/Charts/SP500/Outlook.htm 

1997 Hong Kong Housing Blowout 

Prices plunged 60% in 6 years. Chart by Gus Lubin  October 29, 2010 

The current Hong Kong housing bubble worries were renewed this week when prices passed the 1997 peak, and you can see what happened after the 1997 peak. 
www.businessinsider.com/hong-kong-housing-bubble-chart-2010-10  

Hyperinflation is very poorly understood by modern economists.  

Cullen Roche's research has shown that this is likely due to the lack of evidence showing direct connections between economic environments and consistency in prior cases of hyperinflation. 

The widely held belief is that government debt and deficits (aka, “money printing”) lead to hyperinflation. But Cullen's research shows that hyperinflation is not merely the result of “money printing” or an expansion of the money supply and in fact tends to occur around very specific and severe exogenous economic circumstances which lead to an increase in the money supply ultimately leading to hyperinflation.

Hyperinflation is not merely high inflation or a collapse in confidence, but is actually due to severe exogenous shocks with very real and provable transmission mechanisms. Historically, these events tend to be:

• Collapse in productivity or lack of economic stability due to lack of productivity.
  
• Rampant government corruption.
  
• Loss of a war.
  
• Regime change or regime collapse.
  
• Ceding of monetary sovereignty generally via a pegged currency or foreign denominated debt.
  

For more on this subject please refer to Cullen Roche's research at:  http://pragcap.com/resources/understanding-hyperinflation

New York Commercial Building gets Marked to Market  October 6, 2009 PBS News Hour ~ Youtube (5:53min) 
www.youtube.com/watch?v=1VcyxmF89ns

An office and retail tower in Midtown Manhattan was purchased in 2007 by World Wide Plaza for approximately $1.7 billion as part of a package of properties totaling $7 billion. The banks who put up the financing approved the deal and allowed the purchaser to put down only $50 million (3%)! 

2 years later the owners,  could not refinance their term first and second mortgages and gave the property back to the banks who then sold the previously valued $1.7 billion property for $600 million, a 65% or $1.1 billion loss.

The following goes a long way in reporting how a fascist state can exist in a "modern" world and how good people are easily persuaded to do bad things. The collapsing real estate bubble in Dubai has the potential to spark a switch from global risk embrace to revulsion setting up a viral firestorm of credit markdowns and interest rate hikes. BR

The Dark Side of Dubai "Dubai was meant to be a Middle-Eastern Shangri-La, a glittering monument to Arab enterprise and western capitalism. But as hard times arrive in the city state that rose from the desert sands, an uglier story is emerging." by Johann Hari  April 7, 2009

"Dubai is a vast sinkhole into which western banks and governments unquestioningly poured not just billions but trillions of dollars which was then leveraged enormously by means of derivatives enabling Dubai to build itself up into a latter day Rome, with a level of opulence and extravagance that would have made Caesar green with envy." by Clive Maund December 6, 2009