It’s Bubble Time! Wisdom and Discipline Will Separate Winners From Victims

Editor's Note: The following is a guest post by Chris Martenson with PeakProsperity.com.

It's impossible to predict with certainty how much more insane our financial markets will get before an inevitable correction. But my personal bet is: A lot!

For my reasons why, take a few minutes to watch the chapter on bubbles below from The Crash Course. For those who haven't seen it before, the takeaway is this: bubbles pop only when greed in the market has been exhausted:

Bubbles make no sense economically. Or rationally. But they happen all the time as a part of the human condition.

Even while financial bubbles are enabled by dumb monetary and banking decisions, their actual genesis is rooted in primal human emotions. Greed on the way up, and fear on the way down.

The hardest part about these bubbles is not being swept up in them. As the above video shows, history is chock full of asset bubbles. We humans just never seem to learn. Like Charlie Brown's endless attempts to kick Lucy's football, we get suckered in by the promise of easy riches, only to end up flat on our back when the market suddenly yanks that promise away.

Wash, rinse, repeat.

Most of you reading this might be thinking “Hey, I’m a reasonable, intelligent person. I won't fall victim to the next bubble.” Perhaps, but maybe not. The numbers say that the majority of you will. Unfortunately, being smart -- even a genius -- is no protection against being ruined by a bubble.

Remember from the video that even Sir Isaac Newton, easily one of the most brilliant humans ever to live, got his clock cleaned by the South Sea Bubble:

Bubbles are much easier to enter than to exit. As they build, all your friends and neighbors are diving into the pool and enjoying easy riches. You deserve some of that good fortune, right? And there will be plenty of eager parties willing to help you get on the bandwagon.

But when the bubble pops, though, action becomes much harder to take. At first, everyone assumes that the sudden drop is a temporary aberration and that the party will shortly resume. As prices fall further -- and they typically fall at a faster rate than when they were rising -- folks become paralyzed by fear on the way down, slowly realizing that their paper profits may indeed be gone for good. At first they're unwilling to give up the dream of the "sure thing" they so recently had, and then, once the losses start mounting, they find themselves resistant to locking in those losses by selling. Instead, they hold on to the increasingly threadbare hope that prices will at least recover to where they can ‘get their money back.’

Of course, that never happens. For all those who bought in during the mania, their money was hopelessly betrayed the moment they placed their bet. And that’s what bubbles are – merely bets. And that bet is: I bet I can get out before everyone else.

That’s mathematically impossible for the majority. It’s really only possible for a very tiny few who have the vision and the discipline (and more often than not, the luck) to pull it off. Very rare are the people who get out at the top.

Don't Be A Victim

So, to avoid becoming victim in the future, the first thing you need is the clarity to know when you have a bubble on your hands.

Well, it really doesn’t get any clearer than this:

Why Toronto (and Other Cities) Inflate Housing Bubbles to the Bitter End

Feb 20, 2017

“Let’s drop the pretense. The Toronto housing market and the many cities surrounding it are in a housing bubble,” Bank of Montreal (BMO) Chief Economist Doug Porter told clients in a note last week.

Many have called it “housing bubble” for a while, but now it’s official, according to BMO.

In January, the benchmark price and the average price were both up 22% year-over-year, with the average price of detached homes up 26%, of semi-detached homes 28%, of townhouses 27%, and of condos 15%. Double-digit price increases have become the rule in recent years.

But this jump was “the fastest increase since the late 1980s – a period pretty much everyone can agree was a true bubble – and a cool 21 percentage points faster than inflation and/or wage growth,” Porter explained in his note, cited by BNN.

Holy smokes! Or rather, what are people smoking up there? Bubble weed, or something. A 22% yr/yr gain? On top of a string of recent years of double-digit gains?

Here are two more features about bubbles we need to keep in mind:

1. Bubble exist when prices rise beyond what incomes can sustain

2. Bubbles always have a blow-off top

First, house prices rising a ‘cool’ 21 percentage points above wage growth over a single year is the very definition of bubble behavior. Simple math tells us that anyone who borrows to buy property eventually has to pay that loan back.

The money to pay back that property loan comes from wages. Ergo, property prices and wages cannot depart from each other forever, or even for very long, without a lot of repayment defaults resulting.

As for ending in a "blow-off top", that's just how history tells us bubbles finally exhaust themselves. They draw in every last sucker and lazy-thinking ‘investor’ until there's no "greater fool" left willing to pay a higher price. This doesn't require 100% participation from the local population; only 100% participation from everyone who can be drawn in. When that finally happens, that’s when the bubble bursts all of its own accord.

There's another way for a bubble to end, but it practically never happens. Responsible bankers and lenders could prevent the bubble's formation by simply not lending ridiculous amounts. It almost never happens for the same reasons that people buy overpriced houses: greed and our social programming to follow the herd. If all your banker buddies are making big bucks writing loans to anyone who can fog a mirror, then you'll be rewarded for doing the same. Nobody wants to be the lone, unpopular voice urging restraint when the crowds are going wild.

The quotes below from the 1850’s show how this dynamic is nothing new to society:

“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, one by one.”

“In reading The History of Nations, we find that, like individuals, they have their whims and their peculiarities, their seasons of excitement and recklessness, when they care not what they do. We find that whole communities suddenly fix their minds upon one object and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first.”

―Charles Mackay,in Extraordinary Popular Delusions and the Madness of Crowds

Well, the good people of Toronto -- as well as Vancouver, Palo Alto, Melbourne, and a large number of other real estate markets -- have fixed their minds on the delusion that the recent skyrocketing price appreciation means that home prices will continue to always rise from here. So get in now! You can't lose! Don't risk getting priced out of the market!

What particularly crazy about this is that we just saw 10 short years ago how this movie ends. But those caught up in the current mania simply aren't thinking logically right now. They're fully captured by the bubble mania.

And, as before, it’s lonely out here for those of us trying to be the voice of sanity and reason. Nobody want’s to hear that now.

And later, once the painful correction has wrought its destruction, those of us who dared to sound an alert may be blamed as responsible for the losses - as if by pointing out the delusion we caused the burst to happen.

Conclusion

I could go on and on, risking being the boy who cried wolf, and point out all the other obvious bubbles infecting our financial landscape that all but assure a very difficult future of financial and economic pain.

But I won’t at this time, having already pointed out the major bubbles in last week's article, The Mother of All Financial Bubbles.

The delusion much of society wants to believe in is that we can get something for nothing. That is, to become rich, all we have to do is buy an asset like a house or Apple stock and simply wait.

The wealth will just magically arrive. No work performed, nothing new created, nothing done. Just buy, and wait.

Of course, even a cursory examination of all of life in nature (or before humans invented thin-air money printing) quickly reveals that actual wealth comes from hard work, usually coupled with taking risks.

But somehow we’ve slipped back into the common and very human delusion of that our current culture has somehow figured out how to escape the old bonds of wealth creation. This time is different!

The Romans re-minted coins in smaller and less pure weights and it worked! For a while. Then its empire collapsed on itself.

Zimbabwe (and now Venezuela) printed and it worked! For a while. Then its citizens were left impoverished.

Society's dangerous conceit is in thinking that somehow we’ve managed to, this time, escape the hard rules of wealth creation and have discovered a new principle by which we can all get wealthy without doing anything at all. All you have to do is play the game. Put your money to work! Buy stocks and houses and you can't go wrong!

And it’s working! For now.

But when we back up a bit, it’s pretty easy to see how this cannot be true. Not for the majority. Why? Because real wealth isn't a paper gain on a house. Nor is it even money in the bank. Or a large stock portfolio.

Real wealth consists the final things you consume: food, appliances, transportation, entertainment, clothes, energy, etc.

Those are real things. They have to come from somewhere. Which means they have to be produced, stored, transported, and sold. By themselves, your cash and your stock portfolio have no value. Those are merely claims on true wealth.

So how can it be possible for everyone to be exponentially increasing their claims on real wealth, without the underlying pie of real wealth itself, increasing at an equivalent rate?

It’s not.

And that’s the painful lesson that gets learned and re-learned as each new generation gets duped and then dumped by an asset bubble.

Sadly, bubbles used to happen only once in a generation. Once those burned by the last bubble have died off, the younger generation has no living memory to prevent them from getting suckered by the next one. But for some reason, our current generation has something of an addiction to bubbles. We've lived through the tech stock bubble, the real estate bubble, and now we're living inside the 'everything' bubble.

What's wrong with us?

My advice is to sell your house if you live in Toronto, or a similarly bubblicious real estate market. Similarly, reduce your exposure to stocks and bonds at these record highs, and develop a wealth protection strategy with a financial adviser who understands the risks in today's markets.

Know what the bubble signs are and be smarter than Newton by standing aside, nodding knowingly, and tolerating your "smart" friends and neighbors.

It’s one of the very hardest things to do, but it’s also one of the most important.

Odds are high you'll be proven the smart one once the current bubble bursts.

And if you haven't read it yet, read our report How Bad Will It Get? in which we detail the tremendous scale of the losses that will result when this Mother Of All Financial Bubbles collapses. It will be a traumatizing time for society, and many, many people will see their wealth vaporize.

The key objective at this time is to position yourself for physical and financial safety. For those who do will be in a position to prosper greatly, as well as offer much-needed support to others, when the coming reset arrives.

Glenn: The Left's January 6th narrative doesn't hold four years later

Kent Nishimura / Los Angeles Times | Getty Images

Four years ago yesterday, the events of January 6th, 2021 unfolded—an event that the Left repeatedly said was the darkest day in our country's history. Yet, as time passes, the narrative surrounding that day has started to unravel, revealing uncomfortable truths that demand both explanation and accountability.

For millions of Americans, January 6th marked a dividing line, a day that deepened the fractures within our society. Emotions ran high, and trust in the institutions that were sworn to protect us was shattered, a portion of which will only be restored by dramatic action. This trust continues to erode as new details emerge, revealing gaping holes in the Left's narrative about January 6th.

The lies that surrounded the events of that day were not mere "misinformation"—they were bombshells that forced us to confront a much darker reality about our government’s actions. And these revelations must become the message we take from January 6th: the true nature of our current government, its accountability, and the lengths to which it will go to protect its version of events—even when it is a lie.

Let’s begin with the pipe bombs. On January 6th, Americans were told that two pipe bombs had been found near the RNC and DNC headquarters and that they could have caused catastrophic harm. The pipe bomb was placed at the DNC headquarters the night before January 6th. Interestingly, the security sweep of the building the next morning did not find it. Then Kamala Harris was transported in the height of January 6th. Conveniently, all the records detailing the event were “accidentally” deleted by the Secret Service.

Surveillance footage was ignored, cameras were turned just hours before the bombs were planted, and we were told that critical cell phone data was somehow “corrupted.” But it wasn't. The only thing that was corrupted was our own government and FBI. According to the cell phone companies, the FBI simply never asked for the information. Leads were never pursued. Four years later, the identity of the bomber remains a mystery.

Why would federal agencies neglect this critical investigation into an event that allegedly was going to destroy the republic or kill the future vice president? Was the lack of action intentional, perhaps a convenient distraction to justify escalating security measures and cast a broader shadow over what they hoped would unfold that day? These are not wild conspiracy theories; these are questions every citizen must ask. Because now we know that our government lied to us.

We must also address the FBI’s role on that fateful day. We’ve learned that 26 FBI informants were present on the ground during the events at the Capitol. Let that sink in. What were they doing there? Were they infiltrating the crowd? Were they acting as provocateurs? The presence of these informants raises serious questions about how much of the chaos that day was organic and how much of it was orchestrated. If the FBI had informants on the ground, why wasn’t the situation under control before it escalated?

Four years ago, I called for the protesters to stop. I said that this isn't who we are, and these people should go to jail. I still stand by the belief that if you hurt anyone, broke any windows, or damaged property, you should be held accountable and serve a just punishment. But today, I’m deeply concerned that many of those who were not violent or engaged in damage are still languishing in jail, some facing sentences of up to 20 years. What’s more disturbing is the growing evidence that the chaos that unfolded was not an accident—it was part of a broader agenda.

Amid the chaos, the finger was pointed squarely at one man: Donald Trump. But new information paints a vastly different picture. Just days before January 6th, President Trump authorized the deployment of the National Guard, citing concerns over potential unrest. Yet, his request was ignored—rejected outright by House Speaker Nancy Pelosi and the Capitol Police. Why? Who in the chain of command made the decision to disregard the president’s directive? Had the National Guard been allowed to deploy, it’s possible much of the mayhem that followed could have been prevented. But instead, that opportunity was squandered, and the media narrative was shaped to fit a political agenda—one that painted Trump as the instigator, when in fact, he sought to prevent the violence that ultimately occurred.

And then, there’s the tragic death of Ashley Babbitt. A decorated Air Force veteran, Babbitt was shot and killed by a Capitol Police officer while attempting to climb through a broken window. Her death was quickly ruled justified, and the officer involved was shielded from scrutiny. But now, we learn that the officer violated multiple procedural rules and could face criminal charges. Why was her death dismissed so quickly by both the media and the government? In an era where police actions are scrutinized heavily, why was this officer not held accountable?

As we look back, it's clear that January 6th was chiefly about the perversion of justice by the very institutions that were supposed to protect us. Big-tech corporations and global entities like telecoms and airlines offered up location data on innocent Americans who were simply in Washington, D.C., on January 6th. No warrants. No due process. They handed over personal data without question, and the FBI used it without hesitation.

What the FBI did with that data, how Americans there on that day didn't stand a chance in D.C. courts, how our politicians and federal law enforcement knew what was going on yet did nothing to prevent it, the calling off of the National Guard—what does this tell you about our country? Our government, our justice system, and our institutions were complicit in undermining the very principles they were created to uphold.

They are trying to create a system that thrives on division and chaos, a system that uses fear as a tool to control the American people. If the federal agencies can lie, manipulate, and withhold the truth about January 6th, what else are they capable of? What are they willing to do to maintain their grip on power?

Four years later, on the anniversary of January 6th, we must demand the truth—not the sanitized, politically convenient version. We deserve the full, unvarnished truth. We must hold accountable those in power who orchestrated, covered up, or ignored the events of that day. We must never allow the lies and the unanswered questions of January 6th to fade into the political ether. We must ensure that the truth is told and that those who lied to us are held accountable.

The Deep State's NEW plan to backstab Trump

Brandon Bell / Staff | Getty Images

We cannot make the same mistake we made in 2016 — celebrating victory while the deep state plots its next move.

In 2016, Donald Trump shocked the world by defeating Hillary Clinton. Conservatives cheered, believing we’d taken back the reins of our country. But we missed the bigger battle. We failed to recognize the extent of the damage caused by eight years of Barack Obama and decades of progressive entrenchment. The real war isn’t won at the ballot box. It’s being waged against an insidious force embedded deep within our institutions: the administrative state, or the “deep state.”

This isn’t a new problem. America’s founders foresaw it, though they didn’t have a term for “deep state” back in the 1700s. James Madison, in Federalist 48, warned us that combining legislative, executive, and judicial powers in the same hands is “the very definition of tyranny.” Yet today, that’s exactly where we stand. Unelected bureaucrats in agencies like the Environmental Protection Agency, the Department of Energy, and the Department of Justice hold more power than the officials we vote for. They control the levers of government with impunity, dictating policies and stifling change.

This is the fight for the soul of our nation. The founders’ vision of a constitutional republic is under siege.

We’ve felt the consequences of this growing tyranny firsthand. During COVID-19, so-called experts ran our lives, crushing civil liberties under the guise of public safety. Our intelligence agencies and justice system turned into weapons of political warfare, targeting a sitting president and his supporters. Meanwhile, actual criminals were given a pass, turning American cities into lawless war zones.

Thomas Jefferson wrote in 1816 that “the functionaries of every government have propensities to command at will the liberty and property of their constituents.” Today, we see Jefferson’s prophecy fulfilled. The deep state exercises unchecked power over our freedoms, and information itself is controlled by the fourth branch of government: the legacy media.

Even when we win elections, the deep state doesn’t concede defeat. It switches to survival mode. Trump’s first term proved this. Despite a historic mandate to dismantle the bureaucracy, the deep state fought back with everything it had: leaks, investigations, court rulings, and obstruction at every turn. And now, with the possibility of Trump returning to office, the deep state is preparing to do it again.

Progressives are laying out their attack plan — and they’re not even hiding it.

U.S. Rep. Wiley Nickel (D-N.C.) recently boasted about forming a “shadow cabinet” to govern alongside the deep state, regardless of who’s in the White House. Nickel called it “democracy’s insurance policy.” Let’s be clear: This isn’t insurance. It’s sabotage.

They’ll employ a “top down, bottom up, inside out” strategy to overwhelm and collapse any effort to reform the system. From the top, federal judges and shadow officials will block Trump’s every move. Governors in blue states like California and New York are gearing up to resist federal authority. During Trump’s first term, California filed over 100 lawsuits against his administration. Expect more of the same starting January 20.

From the bottom, progressive groups like the American Civil Liberties Union will flood the streets with protesters, much as they did to oppose Trump’s first-term immigration reforms. They’ve refined their tactics since 2016 and are prepared to unleash a wave of civil unrest. These aren’t spontaneous movements; they’re coordinated assaults designed to destabilize the administration.

Finally, from the inside, the deep state will continue its mission of self-preservation. Agencies will drag their feet, leak sensitive information, and undermine policies from within. Their goal is to make everything a chaotic mess, so the heart of their power — the bureaucratic core — remains untouched and grows stronger.

We cannot make the same mistake we made in 2016 — celebrating victory while the deep state plots its next move. Progressives never see themselves as losing. When they’re out of power, they simply shift tactics, pumping more blood into their bureaucratic heart. We may win elections, but the war against the deep state will only intensify. As George Washington warned in his Farewell Address, “Government is not reason, it is not eloquence — it is force; and force, like fire, is a dangerous servant and a fearful master.”

This is the fight for the soul of our nation. The founders’ vision of a constitutional republic is under siege. The deep state has shown us its plan: to govern from the shadows, circumventing the will of the people. But now that the shadows have been exposed, we have a choice. Will we accept this silent tyranny, or will we demand accountability and reclaim our nation’s heart?

The battle is just beginning. We can’t afford to lose.

Editor's Note: This article was originally published on TheBlaze.com.

Drone mystery exposes GLARING government incompetence

Gary Hershorn / Contributor | Getty Images

The drone issue is getting way out of hand.

Earlier this month, Glenn first reported on the mysterious drones stalking the night sky over New Jersey, but the situation is increasingly concerning as the sightings have escalated. Not only have drones been seen across the Northeast Coast, including over New York City, Maryland, and Pennsylvania, but recently, they have been spotted over the night skies of San Diego and other parts of Southern California.

It doesn't take an expert to identify the potential dangers and risks that dozens of undetectable, unidentified six-foot or larger drones pose to national security. Yet, our government's response has been one of unimaginable incompetence, leaving us to speculate on the origin and intention of these drones and wonder in astonishment at the government's ineptitude. Here are three examples of the government's lackluster response to the mystery drones:

Iranian Mothership and Missing Nuclear Warheads

- / Stringer | Getty Images

After several weeks of hubbub, New Jersey Representative, Jeff Van Drew gave an interview on Fox News where he claimed that the drones originated from an Iranian "mothership" off the East Coast of the United States. This theory has since been disproven by satellite images, which show that all Iranian drone carriers are far from U.S. shores. Another theory suggests that drones may be equipped with sensors capable of detecting nuclear material and that they are looking for a nuclear warhead that recently went missing! With these apocalyptic theories gaining traction in the absence of any real answer from our government, one can't help but question the motive behind the silence.

Pentagon's Limp Wristed Response

Alex Wong / Staff | Getty Images

In a recent press conference, national security spokesman John Kirby responded to reporters demanding answers about the government's lack of transparency, which has caused increasing public anxiety. He insisted that the drones did not pose a threat and were not assets of a foreign power, such as from Iran or China--even though he is still uncertain about their identity and origin. He also claimed that many of the sightings were simply misidentifications of normal aircraft.

This lackluster answer has only further inflamed national anxieties and raised even more questions. If the government is unsure of the identity of the drones, how do they know if they are a threat or if they aren't foreign assets? If they aren't foreign, does that mean they are U.S. assets? If so, why not just say so?

The Pentagon has also stated that they are leaving it up to local law enforcement to spearhead the investigation after concluding that these drones pose no threat to any military installation. This has left many feeling like the federal government has turned a blind eye to a serious issue that many Americans are very concerned about.

Where's Pete Buttigieg?

Chip Somodevilla / Staff | Getty Images

We are in the closing weeks of the Biden administration, and with the finish line in sight, Secretary of Transportation Pete Buttigieg probably figured nothing else could go wrong on his watch—but boy was he wrong. As Secretary of Transportation, Buttigieg is in charge of the FAA, the agency responsible for managing all air traffic across the nation. One would think that mysterious, 6-foot-long, seemingly intractable drones are invisible on radar and flying above major cities would pose a serious threat to the myriad of legal aircraft that traverse our skies. Yet, Buttigieg has been silent on the issue, adding another failure to his resume which includes: malfunctioning airplanes, the train derailment in Ohio, and the Baltimore Key Bridge collapse, just to name a few.

Glenn: How Alvin Bragg turned hero Daniel Penny into a villain

Michael M. Santiago / Staff | Getty Images

We cannot allow corrupt institutions to punish those who act to protect life and liberty.

America no longer has a single, shared understanding of justice. Two Americas now exist, each applying justice differently depending on who you are and where you live. One America, ruled by common sense and individual courage, praises heroes who stand up to protect others. The other, driven by political agendas and corrupted institutions, punishes those same heroes for daring to act.

This stark division couldn’t be clearer than in the case of Daniel Penny, the Marine whose trial in New York City this week drew strong reactions from both sides across the divided line of justice.

If we let this slide, we accept a world in which heroes are treated as criminals and the law is a weapon for ideological warfare.

Penny was on a subway train last year when Jordan Neely — a man suffering from severe mental illness and reportedly high on drugs — began threatening passengers, saying, “I’m going to kill you all.” The fear on that subway car was palpable, but nobody moved. Nobody, that is, until Penny did what needed to be done. He took action to protect innocent lives.

In the America many of us used to believe in, Penny’s response would be heralded as heroic. His actions mirrored the courage of Todd Beamer on Flight 93, who, on September 11, 2001, rallied others with the words, “Let’s roll,” to prevent further tragedy. But in New York, courage doesn’t seem to count anymore. There, the system turns heroes into villains.

Penny subdued Neely using a chokehold, intending only to restrain him, not kill him. Tragically, Neely died. Penny, filled with remorse, told the police he never meant to hurt anyone. Yet, instead of being recognized for protecting others from a clear and present threat, Penny stood trial for criminally negligent homicide.

In Alvin Bragg’s New York, justice bends to ideology. The Manhattan district attorney has made a career of weaponizing the law, selectively prosecuting those who don’t fit his narrative. He’s the same prosecutor who twisted legal precedent to go after Donald Trump on business charges no one had ever faced before. Then, he turned his sights on Daniel Penny.

A jury may have acquitted Penny, but what happened in New York City this week isn’t justice. When the rule of law changes depending on the defendant’s identity or the prosecutor's political motives, we’re no longer living in a free country. We’re living in a state where justice is a game, and ordinary Americans are the pawns.

The system failed Jordan Neely

It’s worth asking: Where were activists like Alvin Bragg when Neely was suffering on the streets? Jordan Neely was a tragic figure — a man with a long history of mental illness and over 40 arrests, including violent assaults. The system failed him long before he stepped onto that subway train. Yet rather than confront that uncomfortable truth, Bragg’s office decided to target the man who stepped in to prevent a tragedy.

This isn’t about justice. It’s about power. It’s about advancing a narrative where race and identity matter more than truth and common sense.

It’s time to demand change

The Daniel Penny case — and others like it — is a wake-up call. We cannot allow corrupt institutions to punish those who act to protect life and liberty. Americans must demand an end to politically driven prosecutions, hold DAs like Alvin Bragg accountable, and stand up for the principle that true justice is blind, consistent, and fair.

If we let this slide, we accept a world in which heroes are treated as criminals and the law is a weapon for ideological warfare. It’s time to choose which America we want to live in.

Editor's Note: This article was originally published on TheBlaze.com.