WRITE for ATol ADVERTISE MEDIA KIT GET ATol BY EMAIL ABOUT ATol CONTACT US
Asia Time Online - Daily News
             
Asia Times Chinese
AT Chinese




     
     Aug 25, '14


CREDIT BUBBLE BULLETIN
Reflexivity, bubbles and profits
Commentary and weekly watch by Doug Noland

Credit Bubbles and financial manias are most fascinating. The written history of some of the more notorious Bubbles too successfully paints monetary fiascos as events driven largely by manic obsession with tulip bulbs or various financial instruments. As a student of the monetary inflations/distortions that underpin market Bubbles ("manias"), I take a differing view.

As much as Bubble episodes seem absolutely ridiculous in hindsight (Internet stocks 1999, subprime 2006), they do not



appear as such in real time. Indeed, the perceived rationality of participating in the boom is integral to Bubble Dynamics. By 1999, it had become obvious that technological innovation was changing the world - and that tech stocks only went up. By 2006, who could argue against the view that home prices only rose and loan losses were a non-issue? Was borrowing at historically low rates to buy a home irrational? How about speculating in higher-yielding MBS? After all, and as was clearly understood throughout the economy and markets (thanks to various bailouts and market interventions), Washington and the Fed would never allow a housing bust.

These days, it's not irrational for "money" to flood into funds indexed to equities and corporate Credit. At this point, there is absolutely no doubt that Washington, the Fed and global central banks would never allow a securities market bust. More ...

Doug Noland is a market strategist for the Prudent Bear Funds.

(Republished with permission from PrudentBear.com. Copyright 2005-2014 David W Tice & Associates. All rights reserved.)





 

 

 
 



All material on this website is copyright and may not be republished in any form without written permission.
Copyright 1999 - 2013 Asia Times Online (Holdings), Ltd.
Head Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East, Central, Hong Kong
Thailand Bureau: 11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110