Saturday, December 19, 2009, 6:04PM ET - U.S. Markets Closed.

The Next Thing Investors Need To Panic About

Posted Nov 11, 2009 11:35am EST by Henry Blodget in Investing, Recession, Banking

Investors always need to be terrified about something.

Eight months ago, it was that the world was about to end: Stocks were down 60% from their highs, the economy was tanking, unemployment was soaring, and commentators everywhere were talking about a second Great Depression.

Now, there's a new concern: We're in the early stages of another humongous asset bubble.

Another BUBBLE?  Didn't we just learn our lesson about those?

Well, yes, we did.  But then we learned that there is one thing that's WORSE than a bubble, and that's global economic collapse.  So, faced with those two alternatives, governments the world over are opting for door No. 2.

Specifically, governments have stomped down on the monetary and fiscal accelerators with both feet, and they show no signs of letting up.

And will this cause another bubble?

Liz Ann Sonders, the chief investment strategist at Charles Schwab, says no.

The Fed will back off before it comes to that, Liz Ann says.  Bernanke talks a good game, but when the evidence of the recovery becomes undeniable, he'll start raising interest rates.  And that should prevent another bubble.

We can always hope...

169 Comments

Terry
Terry - Wednesday November 11, 2009 11:45AM EST

Yes It will bust again as that how Goldman, MS, JPM-Chase etc. make money on the rise and fall. They are already hedged for the bust. And they're doing it with your money. Ha Ha Ha and supported by the government... No Senator should be in office more than 2 terms (12 years) and no Congressmen/women should be in office more than 3 terms (6 years) otherwise they do too much harm to us all. VOTE OUT the INCUMBENTS in 2010.

Donald
Donald - Wednesday November 11, 2009 11:46AM EST

It's nice to be able to count on Liz for a clear-headed, reasoned analysis.

ryan j
ryan j - Wednesday November 11, 2009 11:48AM EST

What a bunch of bull. The market was overvalued at 6600, what we have is trading on emotion backed by nothing. Look at the stats. the states governments are hurting from falling sales and income taxes, shipping by truck and rail numbers suck, the Baltic index is down, what more prof do you need. This a a huge bubble.

william
william - Wednesday November 11, 2009 11:51AM EST

bubbles are good.... that's how we, those who are on the train, make money... for those on the sidelines... see ya... the bubble is on for the next 6 months.... then catch the next train... the trick is not to stand on the tracks and let the train hit you.... invest people or stop whining,,,

Whit Chambers
Whit Chambers - Wednesday November 11, 2009 11:51AM EST

No bubble here. I'm all out.

ezshooter
ezshooter - Wednesday November 11, 2009 11:52AM EST

Wall Street loves bubbles. Money can be made on the up-trend or the down-trend but a market remaining steady is bad for speculators.

william
william - Wednesday November 11, 2009 11:53AM EST

economic "bubbles" have been around since the dawn of history... that's how we've evolved to today's capitalist system... so what's the big deal??? there are winners and losers... it sucks if you're the loser but if feels good to be a winner.... get on the train....

Hhh
Hhh - Wednesday November 11, 2009 11:54AM EST

Why raise interest rates? Lets all enjoy a bull market...hahaha

RobertK
RobertK - Wednesday November 11, 2009 11:55AM EST

At least these Tech Ticker guys are admitting that they want to incite a panic. They were very bullish until this spring and have been mega-bears ever since. They couldn't have been more wrong. I think I'll wait until these guys become bulls again before I sell.

Yahoo! Finance User
Yahoo! Finance User - Wednesday November 11, 2009 11:55AM EST

This Nation need Justice for People== http://www.youtube.com/user/testorx2

Hhh
Hhh - Wednesday November 11, 2009 11:57AM EST

Lets all enjoy a bull market

Simon
Simon - Wednesday November 11, 2009 11:57AM EST

Bubble in GOVERMENT TRUST

william
william - Wednesday November 11, 2009 11:59AM EST

Semper... I am with you brother... ditto...

Helga
Helga - Wednesday November 11, 2009 12:00PM EST

The "free" dollars & other cheap world currencies invested in other overpriced "assets" can dissolve into nothing as phony asset prices fall. The money just evaporates into nothing because it is nothing. Electronic money impulses in a computer is not the same as grain, farmland, rentals or a shovel. Hard assets don't just disappear or evaporate into an electronic rat hole.

Roman
Roman - Wednesday November 11, 2009 12:01PM EST

Bubbles are not recognized when they are inflated, rather when they are busted. So the question is not whether Bernanke will raise interest rates when the economic growth is in full swing. The question is what is the market going to do in the meantime. If the market goes too far ahead of itself, the response of the market will feel like a bubble bursting. Then the 20/20 hindsight will make us wonder what we were thinking when we pushed up everything so high in such a short period of time.

Helga
Helga - Wednesday November 11, 2009 12:02PM EST

The "free" dollars & other cheap world currencies invested in other overpriced "assets" can dissolve into nothing as phony asset prices fall. The money just evaporates into nothing because it is nothing. Electronic money impulses in a computer is not the same as grain, farmland, rentals or a shovel. Hard assets don't just disappear or evaporate into an electronic rat hole.

Yahoo! Finance User
Yahoo! Finance User - Wednesday November 11, 2009 12:03PM EST

william - Wednesday November 11, 2009 11:53AM EST - economic "bubbles" have been around since the dawn of history... that's how we've evolved to today's capitalist system... so what's the big deal??? there are winners and losers... it sucks if you're the loser but if feels good to be a winner.... get on the train.... ----------------------------------------------------------------------------------------------------------------------- Get on the train? You mean be like you? You’re kidding, right?

Ken
Ken - Wednesday November 11, 2009 12:03PM EST

Balance and rebalance your portfolio... That way you'll always sell high and buy low.....Gold, MM, bonds, on one side and assets on the other....You'll always get a big prick in your asset bubble whenever you try and time the market....

notabonehead
notabonehead - Wednesday November 11, 2009 12:08PM EST

The market makes its main gains on just a few strong up days, this is well documented. If you are out on those days you increase your risk and decrease your returns. Consider those who think a 10-20% upside isn’t worth the risk. If that 10-20% comes in the next 6 months as is most likely, you’re looking at one to two years worth of the average gain in 6 months and that is what carries a buy and hold strategy through a downturn. If you miss the upturns as many have, you set up for more risk in the future.

- Wednesday November 11, 2009 12:09PM EST

My sales are still down 70% and I sell mfg equipment. I don't hear of many people that do the hiring say they plan on adding any workers in the near future.

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