QuoteOriginally posted by: mikebellMS' Stephen Roach on the bubble. I fully agree with his analysis!http://www.morganstanley.com/GEFdata/di ... chor0Quick
excerpt:QuoteThat something else is a bubble. Residential property has become the asset of choice for investors in a low-return world awash in liquidity. As The Economist has long stressed, this property bubble is global in scope -- by their reckoning, “the biggest financial bubble in history” (see the Special Report in their 18 June 2005 issue, “The Global Housing Boom”). The worldwide scope of this asset bubble makes it tempting to dismiss America’s problem as part of a broader, more powerful trend. Again, I would argue this is nonsense. The US is very much in control of its own destiny insofar as coping with the excesses in asset markets. In that important respect, America’s equity and property bubbles have one key ingredient in common: The principal blame for both bubbles, in my view, lies with the Federal Reserve.Unlike most other major central banks, the Greenspan Fed has long maintained that asset markets are not within the purview of its policy mandate. The Bank of England, the Reserve Bank of Australia, and, belatedly, the Bank of Japan all believe differently. Ottmar Issing of the European Central Bank has argued that asset markets pose one of the greatest challenges for modern-day monetary policy -- that central banks must now weigh “the risks associated with asset-price inflation and subsequent deflation (see Issing’s 18 February 2004 editorial feature in the Wall Street Journal, “Money and Credit”). America’s Federal Reserve sees it differently. But it wasn’t always that way. Long ago, when America’s Asset Economy was in its infancy, Alan Greenspan worried about “irrational exuberance.” But he quickly changed his mind and went on to champion the equity culture spawned by the New Economy. In my view, that was a policy blunder of monumental proportions.Burst coming in 2007!Sell now!