Both have tried, and tried again, and yet again …, and both continue to try. government have found it impossible difficult challenging to stoke inflation. Since the Great Recession, the Federal Reserve and the U.S. As long as the economy requires a boost, that massive Dollar-printing will continue …, until, that is, it stops (as Stein’s Law stipulates). As long as there is massive Dollar-printing, speculation will be widespread and Bubbles will expand. The speculative heat inflating 2020-21’s Bubbles has been jet-propelled government money-printing, its goal being among other things to depress interest rates (and encourage borrowing) and ignite spending, consumption and inflation. As a consequence, the timing of an imminent Bubble Burst requires a different focus – specifically, on interest rates and inflation’s ability to affect them. Today, the Bubble assets have no alternatives that detract from their attractiveness – bonds, for example, remain less attractive than equities (discussed in “America’s Love Affair with TINA” here). Another pin that pricks a Bubble is a more attractive alternative. Once skepticism takes hold, once the crowd begins to doubt … the game is over. You were hoping, weren’t you? But perhaps the relevant circumstances can be framed.Īs a rule-of-thumb, Bubbles burst when their price so far exceeds their value that the “madness of crowds” subsides (as described in the 1841 classic “Extraordinary Popular Delusions & the Madness of Crowds” ). TLR unfortunately doesn’t have that information. It would be nice to know when that will happen, no? If you keep blowing heated air into Bubbles, they ultimately burst. Each has been a media-fired Bubble that many expect will expand forever and ever …, right? Just as Bubbles have throughout history …, right? Or the price of GameStop (from $4 to $483 in 6 months) or of sports trading cards ($1.3 million for a Tom Brady) or of crypto art ($69 million for a Beeple) or of SPACs …, or the way you used to think about the value of the Greensill Fund (they can’t all be winners!). Or Bitcoin – its price is now $59,000 (having appreciated 500% over the past 12 months).
Don’t worry about how sky-high stock market prices are today.
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