Posts filed under “Markets”

Defining Bubbles

The Nattering Nabob has a very pithy (and astute) observation of what makes a bubble:

Manias share four common characteristics:

• A feeding frenzy sends prices parabolic.

• The public jumps in with both feet.

• Valuations detach from economic reality.

• Rationalizations abound for why valuations are reasonable and the trend will continue.

There are several reasons I have been reluctant to call the Real Estate market a bubble — yet.

- The market is regional; San Francisco, NY and Boston do not = the entire US;
- Its an illiquid market, and properties take a while to sell (as opposed to being flipped intraday);
- Most buyers care little about purchase price — they are concerned with monthly carrying costs. Insurance and Taxes have remained fairly stable;
- 40 year low interest rates allows people to buy more expensive homes, so long as they can afford the monthly nut.

I do expect the hottest areas to fall by as much as 30%, if rates keep rising (as many expect they will) . . .  Is that a bubble popping — or merely a retracement of outsized gains?

Category: Markets

Ebbers Guilty on All Counts

Category: Markets

SEC Budget Insufficient for New Hires

Category: Markets, Politics’s Internet Links of Interest:

Category: Finance, Investing, Markets, Psychology, Weblogs

Are Fixed Income Markets as Wild as Equities?

Category: Markets, Trading

Great Bearish Quotes

Category: Markets

DJIA Rallies (since 1900)

Category: Markets

Risk is on the Rise

Category: Economy, Markets

Nasdaq (and other Bubbles)

Today is the 5th Anniversary of the Nasdaq’s peak –  5048.62 on March 10, 2000 on a closing basis (The Nazz actually hit 5132 intraday). Let’s do a little “compare and contrast” with Nasdaq, and other previous bubbles. Recall we visited this theme in Three Bubbles exactly one year ago (graphic). The goal is to…Read More

Category: Markets

No Goldilocks Economy

Category: Economy, Markets