Things Will Develop In The Opposite Direction When They Become Extreme

There is an old saying in Chinese philosophy, which says “Things will develop in the opposite direction when they become extreme”. 

I am not an expert in ancient Chinese philosophy even being a Chinese myself (I am more of a fan of Western analytical philosophy), but most Chinese people would know this.  When things become too extreme, they go in reverse. 

Financial markets are just the same.  When prices of a certain assets go into an extreme, they will reverse.  That’s when a bubble bursts, for example. 

The universal hatred of the US dollar, for instance, has become an extreme in the past few months.  Among with many other reasons that I have explained, the market is going in the opposite direction.

The reversal was not unforeseeable, and you don’t need a conspiracy to explain it.

This article originally appeared here: “Things will develop in the opposite direction when they become extreme”

Also sprach Analyst – World & China Economy, Global Finance, Real Estate

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