San Diego Housing Bubble News and Analysis

Arraya: You'll recall that Whitney was one of the first, and most strident, voices calling out the fallacies of the boom and warning of the bust.

She was heavily criticized and laughed at by quite a few of the "experts" out there, all of whom were assuring us that all was well.

Good interview and she made no bones about her opinions on the various markets, government agencies and investing positions.

Good stuff.

I agree with a lot of what she said. The S&P's current valuation is discounting well above-average GDP and profit growth - from normalized levels (and we're not at normalized levels yet) - for the next 5 years. I think this is HIGHLY unlikely.

The big banks are on fire and while their stock prices don't discount a lot of profit growth, they certainly don't discount any future pain. Again, highly unlikely.

But two additional points:

(1) The banks have been raising capital like mad during this rally. This puts a floor under their stock prices, so it's unlikely we'll revisit the previous lows even if we have a pullback. Reflexivity is alive and well and it cuts both ways. Right now it's bullish.
(2) A couple of years back, Meredith Whitney had both a variant view on things (and better information) and a variant analysis of the situation. Today, no one disputes her analysis or the information - that's the consensus - just her view of what it means. And that's a dangerous leg to stand on in the capital markets.

Again, I think we're set up for a pretty major pullback at some point before the middle of next year, but... hell... it could be longer.

Société Générale tells clients how to prepare for potential 'global collapse'

Société Générale has advised clients to be ready for a possible "global economic collapse" over the next two years, mapping a strategy of defensive investments to avoid wealth destruction.

http://www.telegraph.co.uk/finance/econo...