No Shortage of Bubbles and Troubles

Sounds like the residential real estate bubble may still have some gas left in it. And that the commercial real estate and corporate mergers and acquisitions markets may be more than able to put any excess cash to work in pumping up their own bubbles.

The Fed's Bernanke has argued that long-term interest rates have been so low for so long -- and so resistant to moving upward under pressure from climbing short-term rates -- because we are in the middle of a global savings glut. There is simply too much cash in the world and too few good investment opportunities for that cash. The result is low rates for lenders and rising asset prices as all that money chases a limited supply of things, be they homes or commercial buildings or corporate buyout candidates.

Until the underlying excess liquidity is removed from the system, deflating one bubble will just produce another bubble somewhere else. So far, the world's central banks and sovereign governments have shown little ability -- and in many cases, no real inclination -- to slow the growth in the supply of global capital, let alone actually reduce it.

So the Federal Reserve is left with a dangerous brew like that boiled up by the witches at the beginning of "Macbeth." Remember what they chant: "Double, double, toil and trouble/Fire burn and cauldron bubble."

At the time of publication, Jubak did not own or control any of the equities mentioned in this column. He does not own short positions in any stock mentioned in this column.