what’s the next bubble?

wanwu2

NEW YORK (CNNMoney.com) — Tulips. Internet stocks. Real estate. Commodities
. What do all of these have in common? If you said that they were all
bubbles, congratulations.

So what’s the next bubble? It may just be in short-selling. That may seem
like an odd concept since bubbles are usually associated with assets
inflating in value (before they go pop and the values sink fast).

But this may be a “negative bubble.” Instead of a state of booming
activity ending in a sudden collapse, we may eventually have a state of
collapsing activity ending in a sudden boom.

These days, it seems that everybody wants to become a short seller. Faced
with one scary headline after another, individuals are increasingly becoming
more bearish.

Kim Hillyer, spokesperson with online brokerage TD Ameritrade (AMTD), said
that short selling activity at the firm’s approximately 7 million accounts
has increased 16% in the past week.

Hillyer said that there has also been a large increase in program trading,
automatic, computer-driven trades that can often exacerbate a sell-off.

Now pessimism is breeding more pessimism. People are starting to think that
it will never get better and can only get worse and those brave few who try
to rationally point out that it’s not the end of the world get branded as
foolish optimists who are probably angry about the money they’ve lost by
buying bank stocks.

Everyone thinks the sky is falling. All that said, the skepticism about the
financial sector, markets and economy is now so extreme that you can’t help
think it is a bubble.

“In twenty years, I’ve never seen a time where so many people are
dismissive of economic numbers,” Kelly said.

The conventional wisdom now is that the sky is falling, just as it was a few
years ago that home prices would keep skyrocketing ad infinitum. That
obviously turned out to be wrong.

The greater fool theory can work in reverse. Investors that keep shorting
bank stocks thinking that there’s nowhere to go but down may find
themselves getting squeezed once the panic subsides.

“With some banks, people are going to look back years from now and kick
themselves for not buying them at these prices. There are great
opportunities if you do your homework,” Tyler said.

sunny_home

That is funny because I called E*trade to enquiry how to become a shorter. We still have time before this bubble is broken.

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