Stanley Fisher, the father of modern central bankers, with his former students being: Lawrence Summers, director of US President Barack Obama's National Economic Council; and Federal Reserve Chairman Ben S. Bernanke, whom Fischer advised on Bernanke's graduate thesis in 1979. (see:When Stanley Fischer speaks, Ben Bernanke listens ) is now head of Israel's head of the central bank.
His comments have showed that Bernanke's guru- Stanley Fisher has learned nothing says there is no housing bubble. By lowering interest rates to record low he has caused Israel's economy to repeat exactly the American experience in the years 2002-2006, while printing money, buying dollars and causing the country's money supply to go up dramatically (see: Israel's money supply explodes )
As a result of his actions, a giant housing bubble has emerged (see: Fisher's bubble still inflating- Israel ranked strongest real estate market) and the stock market is 10% below it's all time high with bank stocks going up 3 times from the lows. (see:Israeli banking stocks up like crazy financial crisis long forgotten housing bubble ignored )
With nothing left to inflate in United States, central banks have succeeded to inflate bubble in all the places where they where not fully bubbled before. Because interest rates in Israel where not at 1% in 2002(actually at double digits) The crazy casino style fiat toilet paper money scheme could work one more time(same thing is true as for Canada, China, Brazil and India)
So the big next crisis will be outside the U.S, with the key being inflation and dollar liquidity. With all the world depending on helicopter's Ben dollars falling around on all who is too big to fail, a short squeeze in the dollar(like what is maybe happening now with the potential collapse of the Euro) will bring all the "emerging world" to it's knees. Anther thing that could happen, with or without a dollar rally is a pickup in inflation which will force those central banks to tighten. In India and in China it seems like it is happening and in Israel it is happening for sure.
When the bubble in Israel pops CAPITAL WILL FLOW OUT OF ISRAEL AND FORCE FISHER TO RAISE RATES, NOT LOWER THEM LIKE BERNANKE.
So a possible combined short on the Israeli government bond market, Israeli banks, and the Israeli Banking index will probably make the short of the year.
Another possible way to capitalize is to short the Israeli stock market via an ETF in the NYSE(NYSE:EIS) But then you are not focused only on the banks.(But don't worry the stock market will sell off as well.). On the other hand, shorting an ETF of a forigen market is a way to short the stock market and the currency at the same time.
When excatly to start shroting is of course the million dollar question but on one thing I am sure of- once intreset rates reach 2.5-3% the whole house of cards will come falling down and fast.
In the meantime, the fact that Housing prices fall in israel for the first time in more than 6 years may be the kickoff. We will need to wait and see.
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The material on this website have no regard to the specific investment objectives, financial situation, or particular needs of any visitor. This site is published solely for informational purposes and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments.References made to third parties are based on information obtained from sources believed to be reliable, but are not guaranteed as being accurate. Visitors should not regard it as a substitute for the exercise of their own judgment. Any opinions expressed in this site are subject to change without notice the writer is not under any obligation to update or keep current the information contained herein.The writer or his clients may have an interest in the securities or derivatives of any entities referred to in this material. In addition, he may make purchases and/or sales as principal or agent. The Financial and Defense Expert accepts no liability whatsoever for any loss or damage of any kind arising out of the use of all or any part of this material. My comments are an expression of opinion. While I believe my statements to be true, they always depend on the reliability of my own credible sources. I recommend that you consult with a licensed, qualified professional before making any investment decisions.
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