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August 2020

Ten years after dot.com bubble

Comparing market performance after big crashes…

(click to play video; source: FT)

The pattern is the market usually go on sideways for a VERY LONG TIME after big crash. This offers a sober lesson for those who got too excited in predicting a robust recovery.

Shiller: Double-dip is less likely

The more plausible scenario is very slow growth. Bob Shiller also has some interesting comments on confidence and bubbles, how they reinforce each other.

Household leverage and house prices

The higher the leverage ratio a country’s household has, the higher increase of house prices; and when bubble bursts, the sharper the price decline.

I am very surprised to find out Denmark (the country I am currently living in) has the highest household leverage ratio. Faint!

The stage of irrational exuberance:

Days of Reckoning:

Read the full research at SF Fed

Is gold in bubble yet?

Not if most common people even don’t know what the gold price is today. Bubble needs herding behavior: when everybody is rushing to get in, that’s where the gold bubble is about to burst. We are far from there.

Gold passes $1,200

Gold just passed $1,200 per ounce.

Gold’s rise has support from fundamentals, but every time you see parabolic move, the bubble is forming. One of the key lessons for investors is “bubble has legs”, it will eventually burst, but nobody knows when.

In 2008, we had “mother of all bubbles” —oil price shot up to $147 per gallon. In 2009-10, we may well have another greater bubble, the gold bubble: $2,000, anyone?

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World gold rush continues…

(click to enlarge)

Minsky Moment in a nutshell

PIMCO’s Paul McCulley gives us a nice graph on Minsky moment: