Simon Black: No Money Loans Down are signs of Philippine Bubbles

Just as the S&P blindly upgrades Philippine credit ratings again (which they will reverse soon), Sovereign Man’s Simon Black sees bubbles in the Philippines

Mr. Black writes: (bold mine)

My partner Tim Staermose and I were talking about it this morning, as he’s currently traveling in the Philippines.

When he went to collect the mail at his old office address yesterday, one of those credit card offers was waiting.

It was sent by a local bank, according to them because Tim is a long-standing customer.

Curiously, though, his account at the bank has less than $400. They know nothing about his ability to repay. They have no clue if he is gainfully employed, or even where he lives. But they sent a pre-approved credit offer regardless.

Another bank– a Philippine branch of a large US bank, mailed him an offer for a “no questions asked” cash loan of about US$11,000, to be paid back over a period of time of his choosing.

And of course, real estate agents are out all over town flogging Philippine investment properties, offering ‘no money down’ deals.

People only make such an offer if they

1) Expect everything to keep rising forever [which is a really baaaaad notion], or

2) They have so much money to deploy, they are forced to make rash decisions and assume tremendous risk just to be able to invest.

Both of these are incredibly dangerous and lead to disastrous consequences.

We remember the last time people thought that ‘real estate can only increase in value…’ Or the last time banks were making no money down loans.

Yet markets, bankers, central bankers, and politicians all have very short memories. This time, it always seems, will be different.

It never is.

But everything is now so interconnected that a credit unwinding in a place as small as the Philippines could actually have a substantial impact on the rest of the world.

It was the same during the Asian Financial Crisis in the late 90s, and exactly the same in 2008 nuclear banking meltdown.

The dominos in the global financial system are spaced so closely together you can hardly see any daylight between them. And a tiny central banking elite is lording over them all, clumsily and hastily cramming even more dominos onto the table.

This isn’t an environment where traditional financial thinking is going to prevail.

From ‘buy and hold’ index investing to the solvency of our banks to the basic premise of paper currency, nothing can be taken for granted any longer.

Real assets– productive land, precious metals, private businesses, etc. are much safer alternatives right now.

One of these days, someone is going to bump the table and all the dominos will start to fall. You won’t want your savings anywhere near it when that happens.

Deterioration of lending standards and one way trade are indeed symptoms of a bubble, but there's even more signs--Mr. Black and Mr. Price can know more of the details here.