From Sebastien Galy of SocGen, a quick meditation on the current state of world markets, and what seem to him as clear signs of a bubble.
Why do bubbles accelerate when identified? The cost of not participating is too high as performance falls vs peers or benchmark. Timing the correction and its intensity is also much harder than participating, while I am sure a bunch of behavioural biases are at work (see James Montier books from GMO). The mad dash higher in bitcoins from 100 with multiple warnings of a bubble to 250 and back down is the most recent example.
You know you are in a bubble when the G20 expresses concerns about the consequences of ultra loose policy for too long. A Forbes survey shows money managers to be at their most bullish over the past 20 years. Gold coins are all the rage from India to Germany (why?). CFTC positioning confirms this view of extended risk taking (long commo and usd vs mainly jpy), while equity ETF flows shows that the US has been the clear darling vs the rest of the world and this for a while. In parlance discouraged by the Economist Style Guide, we are on Hopium squared.
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