RSS feedbubbles
’On benchmarks creating bubbles
Here’s an interesting thought for a relatively quiet Tuesday: Does the investment industry’s tendency towards cap-weighted indices cause bubbles?
We arrive at it slightly tangentially via Steve Johnson’s FTfm story on investors considering a move towards fundamentally-weighted indices.
The 2015 banking crisis begins in commodities
John picked up the phone. It was the bank’s legal counsel, Peter Thompson, calling. He had dramatic news. Garland Brothers, one of the world’s oldest banks, would declare bankruptcy tomorrow. As he lay there in his spacious air-conditioned bedroom,
Whose Chinese property bubble is it anyway?
When it comes to asking what the China risk is, there’s a distinct air of ‘whose line is it anyway?’ regarding the cause of the country’s property bubble.
Is it more the fault of households buying second (third,
Citi sees no bubbles
At least not yet.
Although perhaps best to look away if you’re loaded up on US junk bonds, or Chilean and Indonesian equities in your portfolio.
Charts via Citigroup’s Global Bubble Tracker, as compiled by Robert Buckland’s equity strategy team (click to enlarge):
A different way of looking at debt – and the developed world
Matt King — the god of credit strategy at Citigroup — has a block-buster note out on debt — tackling everything from balance sheet recessions to bubbles and busts.
Let’s start with the basics; what does Matt King reckon debt has to do with current market uncertainty? As it turns out — a lot.
Posen to surplus countries: easy money won’t inflate asset bubbles
Still fresh after his performance as the lone dissenting dove on the UK’s Monetary Policy Committee, Adam Posen has now used the expertise for which he is perhaps best known — Japan’s lost decade(s) — to argue in a speech that easy monetary policy doesn’t lead to asset bubbles.
Dylan Grice vs Emerging Markets
Société Générale strategist Dylan Grice is back on the Rudolf von Havenstein trail.
Grice first brought up von Havenstein back in March, noting the Prussian central banker’s penchant for monetising Germany’s debt during the First World War — leading to massive bouts of hyperinflation.
Did nobody ever consider that indexing was dangerous?
Here’s one for a spirited debate.
A new paper from the National Bureau of Economic Research by Jeffrey Wurgler, Nomura professor of finance at New York University, discusses the potentially overlooked perils of indexing.
The bursting of a bubble, scientifically deconstructed
How’s this for some Friday irony?
The BBC reports physicists have just discovered that, under certain (liquid, ahem) conditions, bursting bubbles don’t just disappear. No, instead they create lots of smaller ‘daughter’ bubbles,
Chinese banks, beyond the bubble
Europe’s sovereign debt crisis has sparked renewed funding fears for western banks, but their Chinese peers are still in the frame for China’s property bubble.
Or perhaps not, according to Barclays Capital.
US monetary base growth is really quite off the chart
From the latest edition of the St Louis Fed’s Monetary Trends:
Err, time to expand those parameters maybe?
On a more serious note, the St Louis Fed’s May Monetary Trends also has a short section on the effect of monetary policy on asset prices — including house prices and equities.
Chinese property: less pop, more boom
Now here’s an interesting take on matters bubble, boom and bust in the role property investment plays in China’s surging growth.
Lombard Street Research made a succinct case on Tuesday for boom, not bubble:
Stop the Chinese steamroller, I want to get off
When your economy grows by almost 12 per cent in a quarter compared to a year ago, surely the question to ask is less if it’s overheating — but rather how much.
In which case, let’s have a look at what analysts said on Thursday about how China can tighten before some nasty asset bubbles pop — across investment and lending,
The bubble in British railways, 1830s edition
The following ars technica headline caught the eye of FT Alphaville on Monday: ‘Historian finds tech bubble that didn’t pop (180 years ago)’.
Ars cited a fresh batch of research by Andrew Odlyzko, author of a paper with an even more intriguing headline,
Beijing: forever blowing bubbles
Breaking news — Chinese property prices just got a little more inflated.
From Bloomberg (emphasis ours):
China’s property prices rose at the fastest pace in almost two years in February, adding urgency to the government’s efforts to rein in speculation and increase the amount of affordable housing.
Soros and the bullion bubble
Gold is rallying — but is it all because of one man’s lack of faith in the euro?
As Bloomberg reported on Monday:
George Soros is helping drive up gold prices by doubling his bet in a market even he considers a “bubble” as Goldman Sachs Group Inc.,
US Housing Bubble v2.0
Here’s one thing that the Sigtarp’s quarterly report to Congress, released on Saturday, made very clear: propping up house prices is now an explicit goal of the US government.
So explicit in fact, that the Special Inspector General for the Troubled Asset Relief Program has knocked up this little chart to show how various policy programmes (Hamp,
`There’s no bubble in gold,’ CIBC says
The idea of a `gold bubble’ went stratospheric in recent days, as economist Nouriel Roubini blasted the “barbarous relic” and the gold bugs who followed it.
And indeed, on Thursday it seemed Roubini was somewhat vindicated,
UBS, the bubble-talk bashers
Want some reassuring commentary that all is well and good in the world of equity valuations?
Well, here’s a pretty bullish bubble-bashing view from UBS, suggesting arguments for a big imminent correction are unwarranted.
Fed slacker fightback
Here’s further evidence that the Fed is somewhat split on the output gap theory and the amount of ‘slack’ in the US economy — and by extension, the inflation and deflation risks that face it.
Slack occurs when the output gap is a negative number — when the economy is below its full potential.
Non-slacker at the Fed
Reuters columnist Rolfe Winkler points us to a recent speech and presentation by Fed governor James Bullard.
The speech, Winkler says, is a direct refutation of economist Paul Krugman’s ideas that inflation,
Dragon-king of the outlier events
This is a black swan.
This is a dragon-king.
Which are you more terrified of?
In a new paper, author and physics professor Didier Sornette, presents the concept of “dragon-kings” — outlier events that exist within conventional power law distributions.
Asia’s forever blowing bubbles
The warnings have been slow but steady – and now both volume and pace are increasing: asset bubbles are back in Asia.
As the FT notes on Tuesday, China has warned its banks to ensure that unprecedented volumes of new loans are channelled into the real economy and not diverted into equity or real estate markets where officials say fresh asset bubbles are forming.
Tulip mathematics
Here it is – a fragment of an infinite-horizon heterogeneous-agent general-equilibrium model.
It forms part of the latest work from Pengfei Wang of the Hong Kong University of Science & Technology and Yi Wen of the Federal Reserve Bank of St Louis,
Madoff behaviour, internet bubble edition
In the last days of the Dot-Com bubble, when wild share price swings and high leverage levels were becoming synonymous with the internet sector, there were a few financial players who exhibited prudence.
Esoteric headline of the day
Comes courtesy of Bloomberg.
Amazing that almost 300 years later Henry Hoare still manages to have such strong opinions on Britain’s banks. Or any opinions at all.
(It is of course, not Henry H.
Mortgage bubbles
Bubbles, in the current climate, are generally not the best way to illustrate the results of government economic initiatives.
Nevertheless, JP Morgan’s UK economy team makes a good point on the British mortgage front with these two charts.
An 1897 boom and bust retrospective
Rolfe Winkler at Option ARMageddon has done us a favour. He’s typed up an 1897 article on booms and busts that bears an impressive resemblance to the current crisis.
The article was written at the end of the US Long Depression (officially 1873 to 1875,
Bubble theory and UK housing
For anyone possibly thinking about getting back into the property market here’s a scary prediction from Dominic Frisby over at MoneyWeek on just how much further houses prices have to fall. To illustrate his point Frisby throws up two charts.