Macro-Agnosticism & the ‘Invisi-Bubble’

Bubble Anatomy/Bubble Anomaly

Market bubbles are called bubbles for good reason. They form, they inflate, they grow to an unstably distorted size, and ultimately they undergo the effects of rapid decompression in search of equilibrium. In a word … they pop. And generally speaking, the bigger the bubble the bigger the bang.

Macro-Agnosticism & the ‘Invisi-Bubble’

Most of us are pretty good by now, we think, at spotting bubbles. After all, we know what they look like; we recognize their characteristics, don’t we? Maybe. Maybe not. Not all bubbles look or act the same.

Market bubbles are most commonly identified by the destabilizing speculation that accompanies them—a Gold Rush mentality, one might say. They are often described as manias, crazes, financial orgies in which the only direction appears to be up, and no one wants to be seen as the last to jump on the gravy train. Think here of the typical investor in 1999 as the dot-com insanity neared its zenith. Think of the leveraged home-speculating and flipping frenzy that peaked in 2006—aided and abetted by the invention of the securitization sausage machine, the latest enabler of Wall Street avarice, which ground out subprime-mortgage-backed securities that author Michael Lewis later described in The Big Short as “towers of crap.” Those were classic “bubbles” all right: mad money bidding up the prices of increasingly riskier assets far beyond their actual worth. But what about now? Is there a bubble inflating again?

If so, it lacks the signature fervor described in the two instances above. Sure, the popular market indices continue their march into new all-time high ground, extending an advance of 159% that began 4½ years ago, with no interim correction greater than 22%. But the telltale signs of emergent retailinvestor, greed-driven speculation are conspicuous by their absence. If anything, whipsawed investors may be more reticent and wary than euphoric or intoxicated by Keynesian “animal spirits.”

PDF link: micro-agnosticism_and_the_invisi-bubble

LEAVE A COMMENT


X
Saved Articles
X
TextTExtLInkTextTExtLInk

The Life and Career of Charlie Munger

Charlie is more than just Warren Buffett’s friend and Berkshire Hathaway’s Vice Chairman – Buffett has actually credited him with redefining how he looks at investing. Now you can learn from Charlie firsthand via this incredible ebook and over a dozen other famous investor studies by signing up below:

  • Learn from the best and forever change your investing perspective
  • One incredible tidbit of knowledge after another in the page-turning masterpiece of a book
  • Discover the secrets to Charlie’s success and how to apply it to your investing
Never Miss A Story!
Subscribe to ValueWalk Newsletter. We respect your privacy.

What’s missing today for many investors is real, straightforward advice.

Especially when it comes to Value Investing and Hedge Funds. 💵

That’s what makes ValueWalk Premium different. Some would say we’re “unusual.”

Our subscribers look forward to clear, easy-to-understand information they can act on.

Sign up for  today for only a few dollars a day and get a 3 day no obligation trial with a targeted 20% discount coupon code.

Cancel anytime during trial and you are never charged.

Limited time offer: For first 50 subscribers

0