Waiting and Watching for the Global Economic Implosion

“The Spanish property market is collapsing!” announced colleague Merryn Somerset Webb this morning.

“Only three countries in the world have a serious subprime problem – the U.S., Britain…and Spain. But no country has taken more advantage of low interest rates to build more houses and sell them at prices they don’t deserve to more people who can’t afford them. They just built too many new houses…

“One building company had gone up 1,000% since it listed only a few months ago. It got whacked yesterday…so did the other builders.”

Today our question is, “How much is too much?”

Many people thought you couldn’t build too many holiday homes in Spain… just as you couldn’t build too many hotel rooms in Las Vegas… or pay too much for Chinese stocks… or pay too much to hedge fund managers… or have too much money in private equity… or too many dollars at large in the world financial system.

Since the expression ‘too much’ has been extant in the English language for a very long time, we assume it must mean something. What we’ve been waiting… and waiting… and waiting… to find out is what it means in financial affairs.

The latest figures show that hedge fund manager Jim Simons earned $1.7 billion last year. Is that too much? He takes an unbelievable 5% of his clients’ assets each year, in payment for his services – plus, and even more unbelievable, 44% of profit. Is that too much?

Readers will remark that his $6 billion Medallion fund rose 84% last year (Simons is good with figures). Investors came out ahead more than 40% even after paying the outrageous fees.

Or what about Ed Lampert or Kenneth Griffin, each of whom also earned more than $1 billion last year. Was that too much? We don’t know. But we came back from our vacation, opened our eyes, and thought we saw ‘too much’ everywhere we looked.

Money streams into new investment funds. Even Brian Hunter, who lost $6 billion trading energy for Amaranth, is starting up a new fund. And John Arnold, formerly of the Enron energy-trading desk, earned more than $240 million last year – partly by taking the other side of Hunter’s trades.

Over on the Las Vegas Strip, Goldman Sachs (NYSE: GS) is buying Carl Icahn’s four casinos…for $1.3 billion. Is that too much? Again, we don’t know; but when it comes to excess, what Las Vegas doesn’t already know probably isn’t worth knowing. The place had a total of 35,000 hotel rooms in the 1970s, which seemed like too many to us. Now, it has five times as many – 151,000 – which seems like more than enough.

But ‘too much’ has dropped from the English vocabulary in Nevada… and perhaps the rest of the world, too. The Venetian alone is adding 3,200 new rooms. And over at the old Stardust Casino, the owners judged it too small, so they blew the place up last month… to build a new development, Echelon Place, with more than 5,000 rooms.

Meanwhile, MGM is spending $7 billion putting up the City Center development – the most expensive development in Las Vegas history. Isn’t that a little too much?

Who knows? All we know is that throughout the world, a great boom is on.

Bill Bonner
Markets and Money

Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.

Bill Bonner

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5 Comments on "Waiting and Watching for the Global Economic Implosion"

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The great boom started in 1982 and it is far from over. It has at least five more years to go (if not longer). The writer of this article (Mr Bonner) should set a year on which he is ready to admit that his eternal warnings were all wrong if it turns out that the US economy as well as the world economy will still be going strong in 2012.

The world will collapse eventually, but it makes a big difference whether this will happen now or 10 years later.


Well Robert, don’t you look like a big jackass today, 16 August 2007. The US economy may very well be going strong in 2012, but only because of Black Swan events like the one currently ripping the guts out of the credit market. Gold gold?

T. Vijayendra

I think it is the beginning of the end. The tipping point is probably 2010 when petroleum peaks.It is worth preparing for it right away. I live in India, on an organic farm without electricity. So it is not so bad for us here. Start improving the efficiency of vegetable oil based lamps! Let me know the results.

Dave McCullough
I have been wondering how a deficit economy could work since I was in grade 9, 1969, and thought that it will eventually tank. Now I know as I am watching it ” tank ” every day when I turn on the TV or listen to the market reports on the radio. Two years ago I was helping my daughter buy a house in Napa Valley California. I could not believe what people were paying for a house and commented to the realtor that this was unsustainable, I live in Alberta Canada, and predicted it will crash as the people… Read more »
David Joseph Kramer
This implosion will happen much faster than expected. There is absolutely no way we as a nation can sustain this, I was in Cali last year and seen the signs last year Jan.. Now our gov is doing everything it can to accelerate the implosion, is this on purpose? I believe so. I am not a conspiracy theorist, but look at the governmnent expansion over the last 30 years and its accelerating. Can anyone tell me why and why our people have not rebelled. It is not a dem or repub problem but both as if it was completely planned.… Read more »
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