Panic in Bubble Park?

God forbid we end the welfare for Wall Street!
So much for the 'magic' of the free market! -- jmac55, The Guardian (UK), June 20, 2013
Unaccustamed as we are to apologise or even to temporize our criticism of agribusines on this site, we must admit that the $2 trillion pumped into the financial sector of the economy by the Federal Reserve in recent years dwarfs farm subsidies. It outs in perspective our poor little valley and its micro-plutocracy of small-time bigshots and the rest of us. And compared to the infantile behavior of the financiers, even Westlands Water Disgtrict General Manager Tom Birmingham looks sounds adult as west-side agribusiness stares another drought in the face 
Meanwhile, the talking heads are calling it the end of the Federal Reserve bubble. Hopefully, for the health of speculators everywhere, the economy will slide back wonderfully into another housing bubble.
Oh joy! We have so much real economic growth to look forward to with the continuing metathasis of the financial sector. But, since all attempts at fiscal policies to regulate the abuses that caused a global credit crash, our fearful leaders took the monetary policy road, pumping the trillions into the financial sector.
And now an attempt is being made to wean the infants off the mother's milk of funny money. Given Ben Bernanke's equivocations, what are the odds of this ever happening? The most likely outcome in two a continued Federal Reserve bubble in tandem with new bubbles here and there. Anything to keep investors happy. Anything! They do so much for us, after all. -- blj
The Guardian (UK)
US stock markets slump after Bernanke drops hint on ending stimulus
Dow falls over 350 points as investors react badly to news that Fed is considering easing back on bond-buying scheme
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US stock markets plummeted Thursday amid fears that the Federal Reserve was preparing to scale back its $85bn-a-month stimulus programme.
The Dow closed down 353.95 points at 14758.24, a 2.34% drop and the index's worst fall so far this year.
The selloff follows a press conference on Wednesday at which Fed chairman Ben Bernanke gave his clearest indication yet that he intends to ease off on the so-called quantitative easing (QE) stimulus programme.
Stock markets reacted badly to the news even as Bernanke made clear that the US economy is improving, and that he had no immediate plans to change tack. Bernanke said he would only cut back QE if and when US unemployment falls to 7%. It is currently at 7.6%.
Despite these caveats, the Dow closed down 206 points Wednesday.
Dan Greenhaus, chief strategist at BTIG, said US stock markets had suffered similar periods of turbulence in other periods when it became clear that Fed policy was likely to change. "Stock can't always go up," he said.
"What Ben Bernanke said about the US economy is good. The question for investors is what it means in the immediate future. Markets have been up 11 of the last 12 months so I think this comes at a time when people see an opportunity to take a break after a terrific run," he said.
The rout in the US markets follows a similar selloff in Europe. In London the FTSE 100 index closed down 189 points, or nearly 3%, in its biggest percentage fall since September 2011. The pan-European FTSEurofirst 300 index fell 2.9%. Spain's Ibex finished 2.9% down, Italy's FTSE MIB lost 3.1%, Germany's Dax lost 3% and France's CAC fell 3.3%.
Worries about the Fed easing off on its historic spending spree were compounded by signs of weakness in the Chinese economy, and reports that the International Monetary Fund could halt payments to Greece.
Oil and gold prices also slid, with gold prices dipping below $1,300 a troy ounce for the first time since September 2010.


Mercury News
Is Bay Area housing bubble back?
Pete Carey
It seems absurd, but a few short years after the biggest home price crash in memory, soaring prices are stoking fears -- or at least stirring talk -- that another housing bubble is forming in the Bay Area.
That has some buyers skittish and others dropping out of a market that favors cash offers and whopping over-asking-price bids.
"It's back to the bubble," said Janine Epstein, a San Jose schoolteacher who is having trouble finding a condominium or townhouse she can afford.
"I don't want to jump in and watch all the prices go down, and at the same time, I don't want to not jump in and watch the prices keep going up," she said.
Not everyone is convinced, and bubbles are devilishly difficult to spot when in the middle of one. But there are warning signs, housing experts say.
Across the nine-county Bay Area, cash buyers accounted for nearly 28 percent of May sales, according to the real estate information company DataQuick, far above the historical average of 13 percent. That's a potential worry because with no constraint by a lender on how much they can pay, these buyers are rapidly bidding up prices. Prices jumped 17 percent from March to April for all types of Bay Area homes, the highest monthly percentage increase since the company began tracking the information in 1988.
"Are there significant risks for anyone getting in the market now?" said DataQuick's Andrew LePage. "Absolutely. Take away any one of three things -- ultralow rates, ultralow supply and ultrahigh investor levels -- and the market's going to feel it."
A bubble is defined by a large run-up in prices for an asset beyond the actual value of the asset. Bubbles are usually followed by a collapse in prices back to, or below, their true values.
For some time, the region has been one of the hottest housing markets in the country. In Silicon Valley, offers of $200,000 to $400,000 above asking price are not uncommon. Some communities in the heart of Silicon Valley -- Cupertino, Palo Alto, Burlingame and Menlo Park -- are back to near or above the prices they hit before the last bubble burst.
Even low-price homes in Alameda County and Contra Costa County are drawing multiple bids, many from investors.
"Is it a bubble? Anybody who tells you they know where the market's going be in six to 12 months is blowing smoke," said Arn Cenedella, a Menlo Park agent who has sold Peninsula real estate for 35 years.
But there's evidence debunking the bubble theory.
Home prices in Silicon Valley are about 3 percent above their "fundamental value," determined by incomes, rents and long-term trends, compared with 59 percent above the value during the bubble in 2005,
Across the nine-county Bay Area, cash buyers accounted for nearly 28 percent of May sales, according to the real estate information company DataQuick. (Paul Sakuma / AP archives)
according to Jed Kolko, chief economist at the online real estate company Trulia. In the San Francisco metro area, including San Mateo and Marin counties, prices are 2 percent above, compared with 52 percent in 2005. In the East Bay, home prices are even with fundamental values, compared with 73 percent above them in 2005.
At $564,250, the median sales price of an existing single-family Bay Area home in May was 23 percent below its 2007 peak of $738,500 just before the crash, according to DataQuick.
"The market is coming back, but it's not coming back as robustly as some people think it is," said Contra County Assessor Gus Kramer. "I don't think there's a bubble per se, because the number of sales are not even close to what they are in a normal market."
But, he said, buyers should be careful about purchasing a house in some neighborhoods where prices have soared based on a few sales over asking price.
The Peninsula and South Bay have regained most of their post-bubble losses, while Contra Costa and Alameda counties have a long way to go.
Interest rate increases will eventually put downward pressure on Bay Area prices, warned Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C.
"None of us knows what will happen to us in the future, but if you're not moving (to the Bay Area) with the expectation you will be there a long time, you very likely are going to be a loser," Baker said.
The current buyer frenzy has several ingredients: interest rates kept low by the Federal Reserve; a low inventory of homes for sale; high rents relative to home prices; rising incomes and job security; and investors and others paying cash for low-end houses and condominiums.
Investors aren't giving up yet. "This is definitely not a bubble," said Geraldine Barry, who publishes a magazine for real estate investors. "I think the market is looking good and will continue to appreciate for the next couple years."
One aspect of the current housing market makes another collapse in home prices unlikely, according to Leslie Appleton-Young, chief economist for the California Association of Realtors.
"The difference between today and 2006," she said, "is that there are almost no no-money-down purchases now, and there are many, many cash sales. If somebody pays cash for their house or puts 40 percent down, when the market goes down 10 percent, they're not going to sell."
Economist Ken Rosen of the Rosen Consulting Group in Berkeley expects the price increases to slow when interest rates rise and when more homes come on the market in response to higher prices.
If prices do sag again, it will be the "flippers" -- investors who buy houses to fix up and resell -- who will feel the pain, said Stan Humphries, chief economist at online real estate service Zillow.
"Speculators and short-term homebuyers could be hurt by that emerging bubble," Humphries said. "Anybody buying for 10 years is not going to be affected."

Merced Sun-Star
San Joaquin Valley farmers get bleak report on water supply…Mark Grossi, Fresno Bee
FIVE POINTS — Growers jammed into the Westlands Water District field shop Tuesday to hear bad news: Expect a zero percent water allocation next February if winter doesn't start out stormy.
A leader with the U.S. Bureau of Reclamation, which sells water to the farmers, described a bleak situation, but stopped short of predicting zero next year. Westlands general manager Tom Birmingham didn't hesitate.
"When we look at these dry conditions and low storage in reservoirs later this year, it's difficult to see how the initial allocation could be anything but zero, unless we have a very big December and January," he said.
The 2014 water allocation came up during a presentation by bureau operations manager Ron Milligan, who attended the Westlands board meeting to explain the water supply situation. More than 100 people, including many growers, filled the room, waiting to pick up hints on next year's allocation.
West San Joaquin Valley farmers rely on that first water estimate to plan their crops, set up loans and prepare the ground for planting.
A zero allocation could mean many thousands of acres are shut down in the 600,000-acre Westlands. Farmers were forced to fallow more than 100,000 acres in 2008, the last time the initial allocation was zero.
Farmers already are in survival mode, shutting down thousands of acres and buying water on the open market this year due to a 20% allocation.
Westlands contracts for more than 1.1 million acre-feet of water, but cutbacks have become common due to drought and wildlife protections.
West-side federal farm contractors buy Northern California river water that must be pumped from the troubled Sacramento-San Joaquin River Delta. From mid-December through February last winter, federal leaders were forced to cut the delta's water pumps to protect the dwindling delta smelt.
The cutback cost the federal and state water projects nearly 1 million acre-feet of water that could have been stored at San Luis Reservoir, west of Los Banos.
To compound the problem, Northern California suffered the driest combined January, February and March on record. It was an ugly end to a wet season that had begun with a wet November and December.
"A lot of things conspired to prevent the water system from working the way it should," said farmer Dan Errotabere, a Westlands board member. "It was one of those years that everyone knew would happen eventually."
Now, San Luis Reservoir is expected bottom out in August or September at its lowest level.
Northern California reservoirs still had about average amounts of water on April 1, said bureau operations manager Milligan. Shasta Reservoir is an important source of water for the Valley's west side.
But there was not much runoff from a small snowpack this year, and water users began taking water sooner than usual. Reservoir levels began plummeting.
At one point during spring, federal leaders were talking about dropping the west-side allocation to 15%, Milligan said. After working through various scenarios, the bureau finally concluded the allocation could remain at 20%, but it has been difficult.
"After April 1, we really got a wake-up call," Milligan said.
Farmer Ted Sheely said he has fallowed some acreage, deciding instead to leave some of his federal water in San Luis Reservoir and use it next year. He asked if there's any chance he would lose the water, which is sometimes called carry-over.
If the bureau needs the reservoir space, carry-over water can be lost, even though the farmer has paid for it.
Birmingham said, "The bureau always has discretion, but I can't imagine the circumstances where they would do it."