How to Capitalize on the Next Wave of Asset Bubbles November 24, 2009
History is appearing to repeat itself with an ever increasing degree of frequency. It has been eight short years since the US Federal Reserve dramatically reduced interest rates to spur economic growth and stave off a recession. Cheap money and lax lending practices spurred the Real Estate bubble and concurrent irrational debt levels by American consumers. When the music stopped trillions of dollars of value had been wiped out and the global financial system stood on the brink of collapse. Now the dance has begun once again with U.S. interest rates near zero and a new wave of carry trades using cheap money to buy everything from gold, crude oil, emerging market equities and of course real estate. It is often said that when your house keeper begins to invest in real estate or gold it is time to sell! So the question is not will the music stop but when will it stop?
In China the central bank has become increasingly nervous over growing asset bubbles noting that of 160 real estate developers that were audited all had a leverage ratio of 90% or more. It is now expected that the PRC central bank will dramatically tighten lending and concurrent capital requirements for Chinese real estate developers creating a new wave of stalled and or partially completed real estate projects. This will be good news for a number of newly formed opportunistic real estate funds like www.cdlchinafund that have the capital to exploit the coming carnage. In commodities look for a new group of funds that are beginning to develop strategies that will exploit the coming correction in oil and gold. While the United States Federal Reserve would like to keep interest rates near zero for an extended period of time mounting global pressure from central banks will ultimately put the U.S. in an untenable position and once rates begin to increase one more dance will come to an abrupt end!
