How To Spot A Bubble
We’ve been entertaining ourselves to no end the past couple days with a ‘vast array’ of articles that purport to provide us with ‘expert’ opinion on the question of whether we are witnessing a bubble or not. Got the views of Goldman’s David Kostin, Robert Shiller, Jeremy Grantham, Jeremy Siegel, Howard Marks.
But although these things can be quite amusing because while they’re at it, of course, the ‘experts’ say the darndest things (check Bloomberg ‘Intelligence’s Carl Riccadonna: “You had equity markets benefit from QE, but eventually QE also jump-started the broader recovery..Ultimately everyone’s benefiting.”), we can’t get rid of this one other nagging question: who needs an expert to tell them that today’s markets are riddled with bubbles, given that they are the size of obese gigantosauruses about to pump out quadruplets?
Moreover, when inviting the opinions of these ‘authorities’, you inevitably also invite denial and contradiction (re: Siegel). And before you know what hit you, it turns into something like the climate change ‘debate’: just because a handful of ‘experts’ deny what’s right in front of their faces as tens of thousands of scientists do not, doesn’t mean there’s a valid discussion there. It’s just noise with an agenda.
And though the global climate system is infinitely more complex than the very vast majority of people acknowledge, fact remains that a plethora of machine-driven and assisted human activities emit greenhouse gases, greenhouse gases trap heat and higher concentrations of greenhouse gases trap more heat. In very similar ways, central banks’ stimuli (love that word) play havoc, and blow bubbles, with and within the economic system. Ain’t no denying the obvious child.
But even more than the climate ‘debate’, the bubble expert articles made us think of a Jerry Seinfeld episode called The Opera, which ends with Jerry doing a stand-up shtick that goes like this:
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