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The Bull 'n Bear on Two Bubbles

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April 19, 2011 – Comments (1) | RELATED TICKERS: BRK-B , GOOGL , AAPL

The thing that struck me in today's review of the press was the contrast between two bubbles at two different stages of their development.

- On the one hand, the WSJ trumpets the news regarding S&P's negative outlook for the U.S.'s credit rating. This is one of the consequences of the bursting of the credit bubble, as private debt (mainly from the financial system) was effecticvely transferred onto the sovereign's balance sheet. Meanwhile, in Europe, the chatter concerning a restructuring of Greek debt has increased and it appears that a bunch of unruly Finns (the True Finns -- an anti-bailout platform) could put a spanner in the works of a bailout for Portugal. At the European level, these things need to be approved unanimously, and the True Finns have just scored well in Finnish elections. Who will pay for the Greeks' profligacy? Some mixture of the Euro core (France, Germany, the Netherlands, etc), the Greek public and the holders of Greek government debt. An eventual restructuring should come as no surprise to anyone -- I've been mentioning it for months and all I do is follow the right commentators/ analysts.

- The other bubble is the one that is developing in the social networking space. As the WSJ announces on its front page: In Silicon Valley, Investors Are Jockeying Like It's 1999. A few winners will emerge from this space, but it's not clear that even these winners will deliver more than middling risk-adjusted returns to public shareholders, given the valuations at which private transactions are taking place. I use Twitter, but it's only to publicize my articles. I'm not sure what other people use it for -- Someone who is following 2,000 people on Twitter can't be following them that closely.

Have a great day!

Alex Dumortier

 

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1 Comments – Post Your Own

#1) On April 19, 2011 at 2:44 PM, kstarich (30.55) wrote:

Your suspicion is probably right about Greece don't have time to expand on it here but the date is Monday May 16, 2011.  The you know what hits the fan for Greece

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