One of the main reasons I deplore superbubbles – and resent the Fed and other financial authorities for allowing and facilitating them – is the underrecognized damage that bubbles cause as they deflate and mark down our wealth. Even more dangerously for all of us, the equity bubble, which last year was already accompanied by extreme low interest rates and high bond prices, has now been joined by a bubble in housing and an incipient bubble in commodities. equities, and the potential pain has increased accordingly.
But during the year, the bubble advanced to the category of superbubble, one of only three in modern times in U.S. This time last year it looked like we might have a standard bubble with resulting standard pain for the economy. So, once more unto the breach, dear friends. I doubt speculators in the current bubble will listen to me now but giving this advice is my job and possibly the right thing to do. The experience also makes it easy for me to sympathize with the view that bearish advice in bubbles always comes from old fogeys who “just don’t get it,” because I received that old fogey advice back then and just didn’t listen. This taught me a lesson, and it helped make me cautious.
My main stock, American Raceways, tripled while I was on vacation – $7 to $21 – then went to $100 by Christmas, only to lose it all even quicker by the following June, as almost all the fireworks exploded and crashed.
#Wild rumpus full#
I participated in a wonderful micro-cap fireworks display from 1968 to 1969, in which I made a small fortune (7 times the then full cost of a year at business school). For bubbles, especially superbubbles where we are now, are often the most exhilarating financial experiences of a lifetime. In a bubble, no one wants to hear the bear case.
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