The Contraction

Stock ownership in some countries is becoming not so fashionable. Especially in Japan, their market seems to be dropping off a cliff. What seems to be worrisome, is the fact that the treasury rate in Japan is 0%. In essence, a bank over there, in search of low risk with a good rate of return, is probably purchasing U. S. Treasury's. Now, if the dollar starts to drop, in relation to the yen, the bank gets eaten alive on the currency conversion. Or, just maybe they break even, using put and call currency options.

Taiwan is also a close clone right now. It may suggest, that these two countries could be the canaries in the "World Economy's Coal Mine."

The Japanese already have had a stock crash and a real estate collapse. Those two items together should have created a bank collapse but peculiarly, they didn't. I think that they printed their way out of it. If so, the "printed money," invested in Treasury's would have given them a 2-5% return for the last 10 years, at little or no cost, a US, subsidy to their banking system.

China just had a real estate collapse in Shanghai last year. A speculative bubble took off and then popped and dropped. It demonstrates a large amount of cash came from somewhere and went no where.

There is a world wide housing bubble that no one wants to talk about. Granted there is a housing bubble here and there, but no body is using words like "world wide."

In San Diego here, we are sitting on 21,000 used houses for sale (no real numbers on the new ones). At the bottom of the last housing market here, there were only 19,000 houses for sale, and we haven't even come close to seeing the prices drop one iota, let alone, see a bottom in the market.

The contraction has started. Every stock, and every house has an owner. Somebody will be in possession while it is finding its "new value."

What will trigger the decline, I fear it may be a bank, a national bank in some foreign country, thats what started it in 1929.