Friday, May 25, 2012

Housing Bubble vs. Silver Bubble

Let's start with some definitions.

Potential Bubble = Exponentially Increasing Sales Volume x Exponentially Increasing Prices

Confirmed Bubble = Extreme Exponential Trend Failure of a Potential Bubble

If you buy those definitions, then the following charts show two confirmed bubbles (and their aftermath).

Click to enlarge.

In the chart above, I'm multiplying the monthly new one family houses sold by the monthly new home median sales price. Check out that failed 8% long-term exponential trend.

Click to enlarge.

In the chart above, I'm multiplying SLV's daily trading volumes by the daily prices, then summing up a total for each month. Check out that failed 4881% short-term exponential trend. Also note that the SLV fund made it into the same ballpark as the entire new home real estate market ($70-$80 billion per month each in May 2011).

Hey Bernanke, you are doing a heck of a job blowing bubbles. Keep up the good work. *sarcasm*

This is not investment advice.

See Also:
Silver Bubble Construction Set

Source Data:
St. Louis Fed: Custom Chart
Yahoo Finance: SLV Historical Prices


Mr Slippery said...

The good news is that in both cases, it looks safe to get back in the water. Especially sf housing, I am less sure about silver but accumulating a little here.

Stagflationary Mark said...

Mr Slippery,

As an economic bear...

If I was looking to buy a new house then I'd probably wait until the next recession. The first chart may be deceiving (painting a picture of false safety).

I have no desire to buy silver at nearly triple what I sold it for in 2006 (which gave me a 50% gain at the time).

This assumes I'm right to be a bear of course.

Next up: Apple

I should have a post up soon.

TJandTheBear said...

Funny... I wouldn't touch housing (or Treasuries), but I'll take all the silver I can get. To each his own.

Stagflationary Mark said...


It is the difference of opinions that makes a market.

Heaven forbid we all agree on something simultaneously. ;)

TJandTheBear said...

So true.

However, weighing the risks it's pretty clear cut to me. Both housing and the dollar have little upside potential but massive downside risk. On a risk-reward basis there's just no comparison.

Treasuries? Picking up nickels in front of a steamroller...

Stagflationary Mark said...


The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. - Alan Greenspan (1966)

In my opinion, toilet paper and canned goods (and anything else that hasn't seen rampant speculation) are relatively safe. Everything else is just an exercise in picking poisons. Sigh.