{"id":29279,"date":"2017-12-31T10:21:01","date_gmt":"2017-12-31T15:21:01","guid":{"rendered":"http:\/\/olduvai.ca\/?p=29279"},"modified":"2017-12-31T10:21:01","modified_gmt":"2017-12-31T15:21:01","slug":"the-greatest-bubble-ever-why-you-better-believe-it-part-2","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=29279","title":{"rendered":"The Greatest Bubble Ever: Why You Better Believe It, Part 2"},"content":{"rendered":"

The Greatest Bubble Ever: Why You Better Believe It, Part 2<\/a><\/h3>\n
\n

During the 40 months\u00a0after Alan Greenspan’s infamous “irrational exuberance” speech in December 1996, the NASDAQ 100 index\u00a0rose from\u00a0830<\/strong> <\/em>to 4585<\/strong> <\/em>or by 450%<\/strong><\/em>. But the perma-bulls\u00a0said not to worry: This time is different—-it’s a new age of technology miracles that will change the laws of finance.<\/p>\n

It wasn’t. The market cracked in April 2000 and did not stop plunging until the NASDAQ 100 index hit\u00a0815<\/strong> <\/em>in early\u00a0October 2002.\u00a0During those\u00a0a heart-stopping\u00a030 months of\u00a0free-fall,\u00a0all the gains of the tech boom were wiped out in an 84%<\/strong><\/em>\u00a0collapse of the index. Overall, the market value of household equities sank from $10.0 trillion<\/strong> <\/em>to\u00a0$4.8 trillion—-<\/strong><\/em>a wipeout from which millions of\u00a0baby boom households\u00a0<\/em>have never recovered.<\/p>\n

Likewise, the second Greenspan housing and credit boom generated a similar round trip of bubble inflation and collapse.\u00a0During the 57 months after the October 2002 bottom, the Russell 2000 (RUT) climbed the proverbial wall-of-worry—-rising from 340<\/strong> <\/em>to 850<\/strong> <\/em>or by 2.5X<\/strong><\/em>.<\/p>\n

And this time was also held\u00a0to be\u00a0different because, purportedly, the art of central banking had been\u00a0perfected in what Bernanke was pleased to call the “Great Moderation”. Taking the\u00a0cue,\u00a0Wall Street dubbed it\u00a0the\u00a0Goldilocks Economy—-meaning a macroeconomic environment so\u00a0stable, productive\u00a0and balanced that it would never again be vulnerable to a recessionary contraction and the resulting plunge in corporate profits and stock prices.<\/p>\n

Wrong again!<\/p>\n

During the 20 months from the July 2007 peak\u00a0to the March 2009 bottom, the RUT gave it all back. And\u00a0we mean every bit of it—-as the index bottomed 60%<\/strong><\/em> lower at 340<\/strong><\/em>. This time the value of household equities plunged by $6 trillion<\/strong><\/em>, and still millions more baby-boomers were carried\u00a0out of the casino on their shields\u00a0never to return.<\/p>\n

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

The Greatest Bubble Ever: Why You Better Believe It, Part 2 During the 40 months\u00a0after Alan Greenspan’s infamous “irrational exuberance” speech in December 1996, the NASDAQ 100 index\u00a0rose from\u00a0830 to 4585 or by 450%. But the perma-bulls\u00a0said not to worry: This time is different—-it’s a new age of technology miracles that will change the laws […]<\/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":[952,1799,124,3598,2120,17722,7195,661,1939],"class_list":["post-29279","post","type-post","status-publish","format-standard","hentry","category-economics","tag-alan-greenspan","tag-bubbles","tag-central-banks","tag-contra-corner","tag-david-stockman","tag-goldilocks-economy","tag-market-bubble","tag-qe","tag-zirp"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/29279","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=29279"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/29279\/revisions"}],"predecessor-version":[{"id":29280,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/29279\/revisions\/29280"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=29279"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=29279"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=29279"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}