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Bonds Meet the Four Criteria for Defining a Bubble

13 August 2019

Forever blowing bubbles - John Authers (BBG Opinion)

There has been a tendency since the financial crisis to label any market that is rallying or deemed overvalued to be in a “bubble.” The word has become overused and debased. But if we treat it rigorously, the bubble concept is still vital in navigating financial markets. And the rigorous treatment reveals that bonds really are in a bubble.

 

Longview Economics Chief Market Strategist Chris Watling published a fascinating research note last week applying the framework introduced by Charles Kindleberger in his book “Manias, Panics, and Crashes.” Kindleberger was an economist at the Massachusetts Institute of Technology for many years and his book has long been taken as the definitive exposition on how markets veer out of control. Watling reminds us that Kindleberger needed to satisfy four conditions before he diagnosed a bubble...

For full article, see HERE...