sucked into investing during the South Sea Bubble, Sir Isaac Newton reflected that he could “calculate the motions of the heavenly bodies but not the madness of people”. From tulip mania in 17th-century Amsterdam to railway fever in Victorian Britain, history is littered with tales of investors who lost their heads shortly before they lost their shirts, in the grip of mass delusions described by Alan Greenspan, a former chairman of the Federal Reserve, as “irrational exuberance”.
One such sign is the mystifying moves in some stocks. On August 19th Apple became the first American company to touch a valuation of $2trn. Tesla, a carmaker that is undertaking a stock split at the end of August, has quadrupled in value so far this year. It is now worth $354bn, more than Ford, Toyota and Volkswagen combined. Nikola, an electric-truck firm , has tripled in value since May. Even more perplexing was investors’ fondness for Hertz, a car-rental firm.
That exuberance has been matched by a third behavioural oddity: companies’ enthusiasm for issuance. Dealogic, a data provider, finds that stock issuance in America has jumped by 85% year-on-year so far in 2020. Part of that may be a result of the pandemic; many companies have raised capital to build up war-chests. But issuance is also compelling in bubblier times, because it allows firms to capitalise on lofty valuations.
What to do, in the face of all this enthusiasm? Other assets may start to seem more alluring. On August 14th Berkshire Hathaway, Mr Buffett’s investment firm, said that it had sold chunks of its stakes in banks and bought up shares in Barrick Gold, a mining company. But gold and other assets have also shot up in value this summer.
Correction- spotting bubbles are very easy. predicting exactly when they will pop is the heavy lift.
Ummmm......
Kırmızı balık gölde kıvrıla kıvrıla yüzüyor. Balıkçı Hasan geliyor, oltasını atıyor. Kırmızı balık dinle, sakın yemi yeme.”
abolish the rentier class and gulag landlords to get rid of property and patent speculation plz
wallst profiteering goes on
The whole thing is a bubble. There, problem solved 🙄
We want the crash to come.
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