{"id":28563,"date":"2017-12-04T13:12:02","date_gmt":"2017-12-04T18:12:02","guid":{"rendered":"http:\/\/olduvai.ca\/?p=28563"},"modified":"2017-12-04T13:34:21","modified_gmt":"2017-12-04T18:34:21","slug":"this-time-is-different-it-just-ends-the-same","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=28563","title":{"rendered":"This Time IS Different, It Just Ends The Same"},"content":{"rendered":"

This Time IS Different, It Just Ends The Same<\/a><\/h3>\n
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This past weekend, I was in Florida with Chris Martenson and Nomi Prins discussing the current backdrop of the markets, economic cycles, and future outcomes. A bulk of the conversations centered around the current \u201ceverything bubble\u201d <\/em>that currently exists globally. Elevated valuations in stock prices, extremely low yields between in \u201cjunk bonds,\u201d<\/em> or intense speculation around \u201ccryptocurrencies\u201d<\/em> all suggest we have entered once again into \u201cbubble\u201d <\/em>territory.\u201d<\/p>\n

Let me state this:<\/p>\n

\u201cMarket bubbles have NOTHING to do with valuations or fundamentals.\u201d<\/em><\/strong><\/p>\n

Hold on\u2026don\u2019t start screaming \u201cheretic\u201d<\/em> and building gallows just yet. Let me explain.<\/p>\n

Stock market bubbles are driven by\u00a0speculation, greed, and emotional biases<\/em><\/strong>\u00a0\u2013 therefore valuations and fundamentals are simply a reflection of those emotions.<\/p>\n

In other words,\u00a0bubbles can exist even at times when valuations and fundamentals might argue otherwise<\/strong>. Let me show you a very basic example of what I mean. The chart below is the long-term valuation of the S&P 500 going back to 1871.<\/p>\n

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First, it is important to notice that with the exception of only 1929, 2000 and 2007, every other major market crash occurred with valuations at levels LOWER than they are currently.\u00a0Secondly, all of these crashes have been the result of things unrelated to valuation levels such as liquidity issues, government actions, monetary policy mistakes, recessions or inflationary spikes.<\/strong>\u00a0However, those events were only a catalyst, or trigger, that started the\u00a0\u201cpanic for the exits\u201d<\/em>\u00a0by investors.<\/p>\n

Market crashes are an \u201cemotionally\u201d<\/em> driven imbalance in supply and demand.<\/strong>\u00a0You will commonly hear that\u00a0\u201cfor every buyer, there must be a seller.\u201d<\/em>\u00a0This is absolutely true. The issue becomes at\u00a0\u201cwhat price.\u201d<\/em>\u00a0What moves prices up and down, in a normal market environment, is the price level at which a buyer and seller complete a transaction.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

This Time IS Different, It Just Ends The Same This past weekend, I was in Florida with Chris Martenson and Nomi Prins discussing the current backdrop of the markets, economic cycles, and future outcomes. A bulk of the conversations centered around the current \u201ceverything bubble\u201d that currently exists globally. Elevated valuations in stock prices, extremely […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[8511,15470,4192],"class_list":["post-28563","post","type-post","status-publish","format-standard","hentry","category-economics","tag-lance-roberts","tag-real-investment-advice","tag-this-time-is-different"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/28563","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=28563"}],"version-history":[{"count":3,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/28563\/revisions"}],"predecessor-version":[{"id":28566,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/28563\/revisions\/28566"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=28563"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=28563"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=28563"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}